Shifting to the US session, the crucial Personal Income and Outlays Report will influence the Fed rate path. Economists forecast the Core PCE Price Index to rise 2.6% year-on-year in January, down from 2.8% in December, while expecting personal income and spending to increase modestly.
Lower-than-expected readings could increase market bets on an H1 2025 Fed rate cut, potentially pulling the USD/JPY pair toward 148.5. Conversely, firm inflation and rising personal income and spending could dampen expectations of near-term rate cuts, potentially driving the pair toward its 200-day Exponential Moving Average (EMA).
Beyond the data, investors should monitor US tariff developments and FOMC members’ insights into inflation, the labor market, and the Fed’s policy outlook.
