Ella 
USD/JPY fell into a tight range after retreating from the 147.95 area during early European trading on Monday. Markets turned cautious ahead of this week’s interest rate decisions from the Federal Reserve and Bank of Japan. The pair is currently trading around 147.68, down 0.11% on the day.
Last Friday’s report from the New York Fed showed that the U.S. New York State manufacturing index improved to 1.9 in August, from the previous value of -19, which was higher than market expectations of -10. In addition, industrial output increased by 0.4% month-on-month in August, compared with the previous value of 1%, which was higher than market expectations. The preliminary value of the University of Michigan’s consumer confidence index fell to 67.7 from 69.1 in September. At the same time, the five-year consumer inflation expectation was recorded at 2.7%, compared with the previous value of 3%.
The market expects the Fed to remain on hold at Wednesday’s meeting, maintaining the possibility of another interest rate hike. Fed Chairman Jerome Powell will hold a press conference later and no major changes are expected. However, the dovish stance of Fed officials may trigger a decline in the US dollar, which is negative for USD/JPY.
For the yen, attention will be paid to the Bank of Japan’s policy meeting on Friday. The odds are rising that the Bank of Japan is closer to abandoning its ultra-easy policy and negative interest rates than initially thought. However, the yen weakened against major currencies after Bank of Japan policymakers said last week they would not consider exiting ultra-loose policies as long as wage and inflation data do not meet expectations.
Market participants will be closely watching the Federal Reserve’s interest rate decision on Wednesday. Markets expect the Fed to remain on hold. The focus will then turn to Friday’s Bank of Japan interest rate decision.
