• The US central bank kept rates unchanged and signaled it would hike rates “soon.”
• The USD/JPY spiked to 114.48 then retreated to pre-Fed levels on a “buy the rumor, sell the fact” event.
• US 10-year T-bond yield shoot through 1.80%, sits comfortably around that level, post-Fed.

On Wednesday, in the Fed’s first monetary policy meeting, the US central bank maintained rates unchanged at 0 to 0.25%, while on its forward guidance, signaled that it will start hiking rates “soon,” which spurred a spike on the USD/JPY towards 114.48. At press time, the USD/JPY is trading at 114.27 at 19:22 GMT.

USD/JPY Market Reaction

The USD/JPY spiked towards 114.48; meanwhile, the US 10-year Treasury yield shoots through 1.8029%.

Summary of the Federal Reserve monetary policy statement

In an overview of the monetary policy statement, Fed policymakers expressed that raising the Federal Funds Rate would be appropriate. As mentioned the last year, the Fed increased the pace of the bond taper and would end the Quantitative Easing (QE) by early March. 

Despite tightening conditions, the US central bank expressed that it will continue to monitor information for the economic outlook. The Fed said that “supply and demand imbalances related to the pandemic and its reopening” contributed to elevated inflation levels.

The US central bank commented that it “expects that reducing the balance sheet size will commence after the process of increasing the target range for the Federal Funds Rates has begun.”

Regarding the job market, they noted that “job gains have been solid in recent months, and the unemployment rate has declined substantially.”

Putting this aside, the USD/JPY trader’s focus turns to the Fed’s Chairman Jerome Powell, who will be speaking at 19:30 GMT. 
Follow the coverage here: Fed Press Conference: Chairman Jerome Powell speech live stream – January 26