Market expectations for a Federal Reserve interest rate hike in September have weakened, with pricing for a September increase falling, according to FX Street. UOB analysts, led by Alvin Liew, now anticipate an extended pause in the Federal Funds Rate through 2026 following the July US CPI data release.
FX Street (UOB) also noted that the USD/JPY exchange rate remains capped below the 50% retracement level of July’s sharp decline, holding near 159.50 yen. This suggests limited upside for the US dollar against the Japanese yen amid the shift in Fed policy outlook.
For Japanese investors, the prospect of prolonged Fed rate stability could ease volatility in FX markets and influence equity valuations, underscoring the importance of monitoring US inflation and central bank signals through 2026.