USD/JPY looks to continue its seven-day winning streak ahead of the FOMC meeting

• USD/JPY looks to claim a five-year high at 118.66 ahead of the Fed’s monetary policy.
• A quarter of the percent rate hike is underpinned against a 50 bps.
• Apart from the Fed’s policy, BOJ’s interest rate decision is due on Friday.

The USD/JPY pair has opened near Tuesday’s closing price at 118.32 but is likely to continue its seven-day winning streak after violating Tuesday’s high at 118.45 amid rising uncertainty over the monetary policy announcement by the Federal Reserve (Fed) on Wednesday.

It is worth noting that the US inflation at 7.9, previously recorded in February is principally higher than the targeted inflation of up to 2%. In order to tame the galloping inflation, the Fed has to shoot up the interest rates. The street was expecting a 50 basis point (bps) rate hike to curtain the well-above targeted inflation. However, the Ukraine crisis after its invasion by Russia has made it difficult for the central banks to shoot up their benchmark rates, considering the intensifying fears of stagflation.

A ceasefire between the Kremlin and Kyiv is far from over although the effects of the headlines are timed now as investors have digested the worst-case scenarios. Therefore, much likely the Fed will choose a 25 bps rate hike and a ‘wait and watch approach for the monetary policies later this year.

The market participants will keenly focus on the stance of the Fed for upcoming Fed Open Market Committee (FOMC) meets. Apart from that, the US Retail Sales on Wednesday also holds significant importance. On Japan’s docket, the Bank of Japan (BOJ) will announce its monetary policy on Friday. The BOJ is likely to keep the status unchanged.