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• USD/JPY loses momentum near 147.12 amid the weakening of the US Dollar.
• US Consumer Price Index (CPI) for August rose 0.6% MoM vs. 0.2% prior.
• Market participants are pricing a massive shift in the Bank of Japan’s (BoJ) monetary policy outlook following the BoJ’s hawkish comments.

The USD/JPY pair lost traction to below the mid 147.00s during the early Asian session on Thursday. The weakening of the US Dollar (USD) drags the USD/JPY pair lower and the pair currently trades near 147.12, down 0.23% on the day.

US Bureau of Labor Statistics revealed on Wednesday that the August headline inflation was the highest monthly gain in 14 months with the US Consumer Price Index (CPI) rising 0.6% MoM from 0.2% in the previous reading. Meanwhile, the annual figure came in at 3.7% from 3.2%, beating market expectations. The core CPI, which excludes volatile food and energy prices surges 0.3% MoM from 0.2% in July. The annual core CPI came in at 4.3% versus 4.7% prior.

In response to the data, the US Dollar (USD) surged and later lost traction as the markets anticipate that interest rates will remain unchanged at next week's FOMC meeting. However, the figures imply that the Fed should be on the lookout for any re-acceleration in inflation in the next months. Investors have priced 97% odds of interest rate unchanged in September at 5.25%-5.50%. However, the possibility of a rate hike in the November meeting increased to 49.2%, according to the CME Fedwatch Tool.

On the Japanese Yen front, market participants are pricing a massive shift in Bank of Japan’s (BoJ) monetary policy outlook following the hawkish comments from BoJ Governor Kazuo Ueda delivered over the weekend. BoJ Governor Ueda stated on Monday in an interview that the central bank could exit its negative interest rate policy when its inflation target of 2% is near and they would have sufficient evidence by the end of the year to evaluate whether interest rates should stay negative. Furthermore, Japanese Finance Minister Shunichi Suzuki said on Wednesday that he will strive to conduct debt management appropriately.

About the data, the Cabinet Office showed on Thursday that Japan’s Machinery Orders fell 13% in July from a 5.8% drop in the previous month. On a monthly basis, the figure dropped 1.1% from a 2.7% rise in June. Both figures came in below the market consensus.

Moving on, traders will keep an eye on the US Initial Jobless Claims, the Producer Price Index (PPI), and Retail Sales due on Thursday. Traders will take cues from these figures and find trading opportunities around the USD/JPY cross.

USD/JPY

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