FX TALKING POINTS:
USD/JPY STRENGTH DWINDLES AHEAD OF BANK OF JAPAN (BOJ) RATE DECISION. RELATIVE STRENGTH INDEX (RSI) PULLS BACK FROM OVERBOUGHT TERRITORY.
USD/JPY pulls back from a fresh monthly-high (109.54) as the 1Q U.S. Gross Domestic Product (GDP) report does little to boost expectations for four Fed rate-hikes in 2018, and the pair may continue to give back the advance from the previous month as the bullish momentum starts to abate. With the Bank of Japan (BoJ) in no rush to alter the outlook for monetary policy, key developments coming out of the U.S. economy may continue to influence the dollar-yen exchange rate as market attention turns to the Federal Open Market Committee (FOMC) interest rate decision on May 2.
U.S. Treasury Yields are under pressure even as the core Personal Consumption Expenditure (PCE), the FOMC’s preferred gauge for inflation, meets market expectations, with the reading climbing to an annualized 2.5% from 1.9%. The reaction suggests the updated figures are not enough to generate an extended hiking-cycle as Fed Fund Futures now point to the benchmark interest rate ending the year around 2.00% to 2.25% (currently sitting at 1.50% to 1.75%).
In turn, USD/JPY may continue to pare the recent advance as the Federal Reserve is widely anticipated to retain the current policy next week, and more of the same from Chairman Jerome Powell