USD/JPY rallies to a two-day high above 134.00 amidst mixed US data ahead of BoJ’s decision

• USD/JPY pierced the 134.00 figure, though it still hovers below the former.
• US economic growth slowed in Q1, while core inflation soared nearly 5%.
• BoJ expected to hold rates and keep the YCC intact amidst Ueda’s first decision.

The USD?JPY snaps two days of losses after falling to two-week lows around 133.01 and rises toward the 133.90s area as the New York session wanes. Mixed US economic data propelled the USD/JPY towards daily highs above 134.00, ahead of the BoJ’s monetary policy decision. The USD/JPY is trading at 133.96 and gains 0.23%.

USD/JPY edge higher ahead of the Bank of Japan’s policy decision

Wall Street finished with substantial gains. The US Bureau of Economic Analysis (BEA) revealed that the US economy slowed to 1.1% in the first quarter of 2023, below estimates of 2%. Although the reading remained positive, it trailed the 2.6% rise in Q4 2022; we should remember that the Federal Reserve (Fed) projections estimate growth at 0.4%.

The same report showed that inflation in the first three months of 2023 rose by 4.9% QoQ, exceeded estimates of 4.8%, and smashed the 4.4% reported in Q4 2022. Given the backdrop, odds for an interest rate increase recovered from 72.1% registered on Wednesday to 87.4% as of writing.

As a reaction, the USD/JPY edged higher, printing a two-day high of 134.19, before retracing some gains. The US 10-year Treasury bond yield, which correlates closely to the USD/JPY pair, climbs 7.5 bps, at 3.524%, a tailwind for the major.

On the Japanese front, its economic agenda will be busy, with the main stage being the Bank of Japan (BoJ) monetary decision, the first for the new Governor, Kazuo Ueda. Analysts estimate some tweak to the message about Covid-19, though they’re not estimating a change in the Yield Curve Control (YCC).

The BoJ will update its economic projections, with investors estimating upward revisions in inflation. However, economic growth is estimated to take a hit amidst the ongoing global economic slowdown.

Further data will be revealed, with Job / Applicants Ration for March, alongside the Tokyo CPI and core CPI readings. Additionally, Industrial Production and Retail Sales would keep USD/JPY entertained ahead of the US inflation data release on Friday.

USD/JPY Technical Levels