{"id":76322,"date":"2025-12-09T21:16:48","date_gmt":"2025-12-09T10:16:48","guid":{"rendered":"https:\/\/www.icmarkets.com.au\/blog\/?p=76322"},"modified":"2025-12-09T21:16:49","modified_gmt":"2025-12-09T10:16:49","slug":"trade-usdjpy-on-the-fomc-interest-rate-decision-2","status":"publish","type":"post","link":"https:\/\/www.icmarkets.com.au\/blog\/trade-usdjpy-on-the-fomc-interest-rate-decision-2\/","title":{"rendered":"Trade USDJPY on the FOMC Interest Rate Decision"},"content":{"rendered":"\n

The Federal Open Market Committee\u2019s interest rate decision on Wednesday is shaping up as one of the biggest potential volatility events of the month, and USDJPY is front-and-centre for traders looking to position around interest rate differentials and forward guidance.<\/p>\n\n\n\n


Markets are now pricing an 89% probability of a 25 bp Fed rate cut, a sharp shift from just a few weeks ago when expectations were sitting closer to 30%. Importantly, the data hasn\u2019t meaningfully changed over that period. The repricing has instead come almost entirely from increasingly dovish commentary from Fed officials, crucially, some but not all, which has encouraged markets to lean heavily toward a cut.<\/p>\n\n\n\n

However, bond markets are sending a different signal. US yields have pushed higher over the past week, suggesting that fixed-income traders may be questioning the degree of dovishness implied by the Fed\u2019s rhetoric. This divergence sets the stage for potential volatility \u2013 and maybe even a rate hold??<\/p>\n\n\n\n

A rate cut is still the base case, so the key market-moving catalyst is likely to come from the Dot Plot, Rate Statement, and Powell\u2019s Press Conference.<\/p>\n\n\n\n