This mix of economic resilience and policy divergence has traders questioning whether intervention looms before year-end.

US Economic Data and the Fed Outlook

While markets speculate about yen interventions and the BoJ’s rate path, US data and Fed speakers could influence US dollar demand later on Friday.

US producer prices and retail sales figures are set for release. Barring further delays to report releases, the two data sets will give key insights into inflation and consumption.

An uptick in producer prices could further temper bets on a December Fed rate cut, boosting demand for the US dollar. Meanwhile, weaker retail sales, likely because of the shutdown, combined with rising producer prices, could fuel stagflation fears.

With the Fed placing greater emphasis on inflation, higher producer prices would point to a less dovish stance, supporting a potential USD/JPY return to 155. Markets have cut expectations of a December rate cut in recent sessions, contributing to the USD/JPY return to 155.

According to the CME FedWatch Tool, the probability of a Fed rate cut in December has tumbled from 69.6% on November 6 to 50.7% on November 13.

Despite near-term strength, the broader outlook remains bearish because narrowing rate differentials could shift momentum in favor of the yen. The Fed remains on a dovish rate path, while the BoJ continues to keep a rate hike on the table. Additionally, markets may speculate about a shift in the Fed’s focus from inflation to supporting the economy, which could trigger US dollar weakness.

The key question now is whether markets buy into the Fed prioritizing inflation.

USD/JPY Scenarios: Diverging Monetary Policies

• Bearish USD/JPY Scenario: Hawkish BoJ rhetoric, intervention threats, weak US data, and dovish Fed comments could drag USD/JPY toward 153.
• Bullish USD/JPY Scenario: Dovish BoJ cues, rising US producer prices, and hawkish Fed chatter could send USD/JPY toward 155.