Important events today:

13:30 UTC – MSC: Change in household spending/income levels

The Japanese yen is getting cheaper against its US counterpart during the Asian session on Friday after data showed that consumer inflation in the Japanese capital slowed sharply in January. In fact, Tokyo’s core consumer price index (CPI) fell below the Bank of Japan’s (BoJ) target of 2% for the first time in nearly two years. This, in turn, confirms policymakers’ view that price pressures will continue to ease in the coming months and eases expectations of an imminent change in central bank policy. Minutes from the Bank of Japan’s December meeting showed that board members agreed to patiently maintain soft policy, undermining the yen’s relative safe-haven status.

Investors expect another significant round of wage increases by Japanese companies could spur consumer spending and demand-driven inflation. This could allow the Bank of Japan to move away from its ultra-soft monetary policy and negative interest rate regime.

Crucial inflation data will play a key role in the Fed’s further policy decisions, which in turn will stimulate demand for the dollar in the near term and provide a meaningful boost to the USD/JPY pair. Spot prices continue to post minor losses for the first week in the last four as attention now shifts to the much-anticipated FOMC monetary policy meeting on January 30-31.

Geopolitics remains the biggest risk to markets, which, along with the uncertain global economic outlook, is helping to limit yen losses. However, any meaningful move to the upside seems elusive amid the underlying bullish tone around the US Dollar, underpinned by lower bets on a near-term interest rate cut by the Federal Reserve (Fed).

Recommendations: Buy orders from the current price level