USD/JPY steady after Fed minutes

The yen is calm on Thursday after sharp losses a day earlier. In the European session, USD/JPY is trading at 148.88, down 0.28%.

The Federal Reserve released the minutes from the September meeting on Wednesday. That meeting was dramatic as the markets were uncertain right up to the rate announcement whether the Fed would cut by 25 or 50 basis points . The Fed opted for the oversized cut and only one FOMC member dissented. The minutes, however, indicated that there were other members who preferred a more gradual pace of lower rates although they went along with the 50-bps cut.

The September decision came after two consecutive employment reports that were softer than anticipated, which may have swayed some dovish members to vote for a 50-bps cut. The takeaway is that Jerome Powell shouldn’t expect the same degree of support for a 50-bps cut at the November or December meetings. The labor market bounced back in September with a nonfarm payrolls report that blew past the forecast and the markets have priced in a 25-bps cut in November.

US inflation will play a crucial part in the Fed’s rate path and September CPI will be released today. Headline inflation is expected to ease to 2.3%, compared to 2.5% in August, while core CPI is forecast to remain unchanged at 3.2%.

In Japan, the BoJ has dampened expectations for another rate hike and is expected to maintain rates at 0-0.25% at the October 31 meeting. New Prime Minister Shigeru Ishiba has supported a monetary policy but has changed his tune since being elected. Earlier this week, Ishiba said there was no need to raise rates, perhaps trying to avoid any controversial statements ahead of the snap election on October 27.

• USD/JPY tested resistance at 148.61 earlier. Above, there is resistance at 149.01
• 147.97 and 147.57 are providing support