USD/JPY advances to near 152.50 as US Dollar gains with US inflation in focus

• USD/JPY jumps to near 152.50 amid US Dollar strength ahead of the US inflation data.
• Economists expect the US CPI to have remained sticky in November.
• BoJ officials reiterated a data-dependent approach for another interest rate hike.

The USD/JPY pair climbs to near 152.50 in the European trading session on Wednesday. The asset strengthens as the US Dollar (USD) extends its winning streak for the fourth trading session on Wednesday ahead of the United States (US) Consumer Price Index (CPI) data for November, which will be published at 13:30 GMT.

The inflation report is expected to show that the annual headline CPI accelerated at a faster pace to 2.7% from the prior release of 2.6%. The core CPI – which excludes volatile food and energy prices – rose steadily by 3.3%.

Investors will pay close attention to the US inflation data as it will influence expectations for the Federal Reserve’s (Fed) interest rate action in the policy meeting on December 18. According to the CME FedWatch tool, the probability for the Fed to reduce interest rates by 25 bps to 4.25%-4.50% is 86%.

As the Fed is widely anticipated to cut its key borrowing rates next week, investors will pay close attention to the interest rate guidance. Analysts at Macquire agree with Fed rate cut market expectations for Fed rate cuts next week but expect the central bank to deliver a slightly hawkish interest rate guidance.

“The recent slowdown in the pace of US disinflation, a lower Unemployment Rate than what the Fed projected in September, and exuberance in US financial markets are contributing to this more hawkish stance,” analysts at Macquarie said.

Meanwhile, the Japanese Yen (JPY) will be guided by expectations about whether the Bank of Japan (BoJ) will raise interest rates in the monetary policy meeting on December 19. Bloomberg reported on Wednesday some sources said few BoJ officials remain open to a hike next week depending on data and market developments. They don’t see any impact in waiting for the next rate hike.