USD/JPY holds above the mid-149.00s ahead of BoJ, Fed rate decision

• USD/JPY hovers around 149.65 ahead of the key events from the US and Japan.
• Core US PCE eased to 3.7% YoY in September vs. 3.8% prior, the monthly Core PCE rose by 0.3% vs. 0.1% prior.
• Analysts anticipate the Bank of Japan (BoJ) is nearing the end of its ultra-accommodative monetary policy.
• Market players will closely focus on the BoJ and Fed interest rate decisions on Tuesday and Wednesday, respectively.

The USD/JPY pair hovers around 149.65 after retracing from the monthly highs of 150.77 during the Asian session on Monday. Traders prefer to wait on the sidelines ahead of the monetary policy meeting from Japan and the US. These events might trigger volatility in the market.

That being said, the divergence in monetary policy between the US and Japan weighs on the Japanese Yen (JPY) against the US dollar (USD). There is some speculation that the Bank of Japan (BOJ) might tweak its yield curve control (YCC) policy. According to a Reuters poll, analysts believe the BoJ will end its negative interest rate policy next year, with more now anticipating the central bank is nearing ending its ultra-accommodative monetary policy.

On the other hand, the Federal Reserve (Fed) is expected to maintain interest rates steady at the end of its two-day meeting on Wednesday, despite the Fed's preferred inflation measure, the Core US Personal Consumption Expenditure Index (PCE), remains far over the 2% target. On Friday, the Core US PCE eased to 3.7% YoY in September versus 3.8% prior while the monthly Core PCE rose by 0.3% versus 0.1% prior. Furthermore, the September's headline PCE Price Index arrived at 3.4% YoY versus the expected 3.4%.

However, the Fed officials stated that recent economic data suggested that economic activity is growing at a solid pace while the job market remains robust. These upbeat reports raise expectations about additional rate hikes at the December meeting, which might boost the Greenback for the time being.

Looking ahead, the BoJ and Fed monetary policy meetings will be in the spotlight this week. Apart from this, the US ISM Manufacturing PMI for October and Initial Jobless Claims data will be released on Wednesday and Thursday, respectively. The attention will turn to US Nonfarm Payrolls on Friday, which is expected to add 172K jobs in October.