USD/JPY Is Exhibiting Erratic Trading With a Pessimistic Lean

Thursday's trading for USD/JPY begins near 147.50, following a retreat from the 148.00 handle on Wednesday. Since reaching a high of 148.50 last week, the pair has exhibited a choppy bearish pattern.

Until the Japanese central bank receives sufficient evidence that inflation in the country's economy will not fall below 2% in the future, the Bank of Japan (BoJ) maintained its dovish monetary policy posture on Tuesday, committed to maintaining interest rates in negative territory.

The Bank of Japan (BoJ) is also monitoring the trajectory of wage changes during the spring, as salary negotiations in Japan customarily occur in large numbers during the initial half of the year.

On Wednesday, US Purchasing Managers' Index (PMI) data for January significantly surpassed expectations, with the S&P Global Manufacturing PMI reaching an 11-month high of 50.3, as opposed to the anticipated unchanged reading of 47.9. Additionally, the Services PMI component improved, posting a reading of 52.9, surpassing the anticipated decrease of 51.4 from the previous month's 51.0.

The markets are currently adjusting in anticipation of Thursday's US Gross Domestic Product (GDP) 4Q update, which is anticipated to decline to 2% from 4.9% growth in the third quarter.

An additional set of Personal Consumption Expenditure (PCE) Price Index figures will conclude the trading week. The month-over-month PCE is anticipated to increase by a single basis point to 0.2% from 0.1%, while the annualized PCE inflation report falls from 3.2% to 3.0%. The PCE estimate for December, which serves as the preferred method for the Federal Reserve to monitor inflation, will be a crucial piece of information for investors anticipating that the Fed will be compelled to speed up rate cuts.