The U.S. Dollar held firm on Friday, trading just below 153.00 against the Japanese Yen as investors braced for key U.S. economic data. The pair hovered near two-week highs around 152.60, marking its fourth straight day of gains, supported by speculation of fresh fiscal stimulus in Japan and anticipation of the U.S. Consumer Price Index (CPI) and S&P Global PMIs due later in the day.
Markets expect headline U.S. inflation to accelerate to 3.1% year-on-year in September, up from 2.9% in August — the highest since May 2024. Core CPI is projected to remain stable at 3.1%, suggesting underlying price pressures persist even as growth cools.
Meanwhile, preliminary October PMIs are forecast to show modest moderation:
- Services PMI: easing to 53.5 from 54.2
- Manufacturing PMI: holding steady at 51.2
These readings would indicate ongoing expansion in both sectors, albeit at a slower pace, as businesses navigate softer global demand.
Fed Cut in Focus as CPI Looms
The data releases come ahead of next week’s Federal Reserve meeting, where a 25-basis-point rate cut is widely anticipated. Markets have already priced in a 90% probability of a second cut in December, signaling confidence that the central bank will prioritize growth over inflation in its late-year policy path.
Analysts say that unless inflation prints significantly above expectations, the Fed is unlikely to alter its easing trajectory. A softer reading could reinforce the view that the tightening cycle has definitively ended, adding pressure to the Dollar while supporting risk assets.
Still, with the Dollar Index near 10-week highs, traders appear reluctant to unwind long positions ahead of official data.
Yen Weakens on $90B Stimulus Hopes
The Japanese Yen remains under broad pressure as reports surfaced that Tokyo is preparing a $90 billion fiscal stimulus plan aimed at offsetting the impact of higher living costs. The package would mirror a similar initiative launched last November, raising concerns about Japan’s growing fiscal burden.
Adding to the Yen’s weakness, the appointment of Sanae Takaichi as Japan’s new Prime Minister signaled a return to Abenomics-style spending. Known for her fiscally dovish stance, Takaichi is expected to favor expansive budgets over monetary tightening, complicating the Bank of Japan’s path toward normalization.
In the near term, analysts see USD/JPY support at 151.80 and resistance near 153.40, with sentiment tilted toward further Dollar strength — especially if U.S. inflation data surprises on the upside.