Wednesday during the Asian session, the USD/JPY pair regains positive momentum and reverses a portion of the previous day's substantial losses to reach 150.15, which corresponds to a one-week low. After the unexpectedly weak Japanese GDP report is released, intraday purchasing accelerates, propelling spot prices to a new daily high between 150.75 and 150.80 in the previous hour.

Preliminary assessments indicate that Japan experienced a substantial deceleration in its economy during the period of July to September, with an annualised contraction rate of 2.1%. This represents the first contraction in three quarters. This strengthens the Japanese Yen (JPY) in conjunction with the Bank of Japan's (BoJ) adoption of a more dovish stance. Aside from this, the risk-on sentiment is also considered a factor bearing on the safe-haven JPY, which provides the USD/JPY pair with a tailwind in conjunction with a modest US Dollar (USD) appreciation.

However, the potential benefits appear constrained in light of anticipations that the Federal Reserve (Fed) will cease increasing interest rates. Tuesday marked the release of data by the US Bureau of Labour Statistics (BLS) indicating that the headline US CPI remained unchanged in October, with the annual rate declining from 3.7% in September to 3.2% – the smallest increase in two years. This, in conjunction with other macroeconomic indicators from the United States that were released this month and indicate a deceleration in wage and employment growth during October, reaffirms wagers that the Federal Reserve has completed its policy tightening cycle.

Presently, market participants anticipate that the Fed will maintain interest rates on hold until May 2024, when it will begin to reduce rates. This resulted in a significant overnight decline in US Treasury bond yields, which could prevent USD bulls from placing aggressive wagers and halt any meaningful appreciation in the USD/JPY pair. For a current outlook, traders are focusing on the economic calendar of the United States, which includes the monthly Retail Sales figures, the Producer Price Index (PPI), and the Empire State Manufacturing Index.

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