Forex Market: USD/JPY edges lower ahead of US CPI data, Kazuo Ueda named as next BoJ governor

USD/JPY edged lower on Tuesday after Kazuo Ueda’s surprise nomination to be the next Bank of Japan governor, while market players were expecting the key US CPI inflation data for more hints on the Federal Reserve’s policy outlook.

The Japanese government nominated Kazuo Ueda, a former BoJ policy board member and an academic at Kyoritsu Women’s University, to become the next governor of the nation’s central bank. The nomination prompted investor bets that the BoJ’s yield control policy might not yet end.

According to National Australia Bank’s currency strategist Rodrigo Catril, Kazuo Ueda is considered as a sensible choice, because he is not a fully committed “uber dove” and should have more flexibility as an outsider.

Meanwhile, market focus is now set on Tuesday’s US CPI inflation report, with headline inflation expected to surge 0.5% in January after a 0.1% drop in December.

Annual CPI inflation is expected to slow down to 6.2% in January from 6.5% in December.

According to Moh Siong Sim, a currency strategist at Bank of Singapore, investors are now mulling if inflation will remain stuck at 3% to 4% or will be brought down to 2% in line with the market’s earlier expectations.

“The odds are shifting to a more reasonable assessment that we might possibly get stuck at 3-4% and the Fed will have to do more,” Bank of Singapore’s Sim was quoted as saying by Reuters.

Futures market is now pricing in a peak in US interest rates at around 5.2% in July and a level of 4.9% at year-end.

As of 9:51 GMT on Tuesday USD/JPY was edging down 0.28% to trade at 131.991.

The US Dollar Index was edging down 0.36% on the day to 102.924.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 132.13
R1 – 133.14
R2 – 133.92
R3 – 134.94
R4 – 135.95

S1 – 131.35
S2 – 130.33
S3 – 129.55
S4 – 128.77