USD/JPY – neutral bias – (101.00-102.20).
Fed Chair Yenne, in her testimonies to Congress this week remained largely dovish stressing the need for continued accommodation but did also counter that for the first time with the prospect of rates moving higher more quickly due to continued labour market strength. Therefore, monetary policy decision expectations will now be more tightly linked to labour market data. We expect greater volatility around the release of key labour market reports going forward. Weak wage growth and housing activity remain source of concern for Fed Chair Yellen.
Next week, the CPI report will be the key data release and we suspect inflation readings will become more supportive for higher rates in the US, which should help support USD/JPY. However, with volatility so low, the range for USD/JPY over the week ahead is narrow.
BTMU