Japanese yen strengthens as rising Tokyo inflation numbers reinforce the Bank of Japan’s hawkish policy outlook.
Following the announcement of the Tokyo Consumer Price Index (CPI) data on Friday, the Japanese yen (JPY) retraced its recent gains against the US dollar (USD). The rise in Tokyo inflation reinforces the Bank of Japan’s (BoJ) hawkish monetary policy stance, boosting the JPY and placing downward pressure on the USDJPY pair.
Tokyo’s CPI increased to 2.6% YoY in August, up from 2.2% in July.
Tokyo’s Consumer Price Index (CPI) rose to 2.6% year on year in August, from 2.2% in July. Core CPI also climbe In August, the YoY rate increased to 1.6%, up from 1.5% previously. Furthermore, Japan’s unemployment rate unexpectedly increased to 2.7% in July, exceeding both market expectations and June’s 2.5%, marking the highest jobless rate since August 2023.
The US dollar remains stable following stronger-than-expected GDP figures on Thursday.
The downside for the USDJPY pair may be limited. As the US Dollar sustains its current advances. Following stronger than expected economic data announced on Thursday. However, dovish words from the Federal Reserve may limit any rises for the Greenback.
Investors are looking for signs about the future direction of US interest rates from the July US Personal Consumption Expenditure (PCE) Price Index. Which will be issued later in the North American Session.
Daily Market Movers: Japanese Yen rises following Tokyo inflation report.
Based on the CME FedWatch Tool, markets are We fully expect the Fed to decrease interest rates by at least 25 basis points (bps) at its September meeting.
Federal Reserve Atlanta President Raphael Bostic, a prominent hawk on the FOMC, stated on Thursday that it may be “time to move” on rate cuts due to continued dropping inflation and a higher-than-expected unemployment rate. However, he intends to wait for confirmation from the upcoming monthly jobs report and two inflation data before the Fed’s September meeting.
The US GDP increased at an annualized rate of 3.0% in the second quarter, above both the predicted and prior growth rate of 2.8%. Furthermore, Initial Jobless Claims revealed that the number of people filing for unemployment benefits decreased to 231,000 for the week ending August 23 down from the previous 233,000 and somewhat lower than the projected 232,000.
US Core Personal Consumption Expenditures (QoQ), the Federal Reserve’s preferred measure of underlying inflation, rose 2.8% in the second quarter, slightly lower than the market forecast of 2.9%. This represents a considerable slowdown from the 3.7% growth rate seen in the first quarter.
Shunichi Suzuki, Japan’s Finance Minister, noted on Tuesday that monetary policies, interest rate differentials, geopolitical threats, and market sentiment all have an impact on foreign exchange prices. Suzuki stated that it is difficult to foresee how these factors may affect foreign exchange rates.
Bank of Japan (BoJ) Governor Kazuo Ueda addressed the Japanese parliament on Friday.
Bank of Japan (BoJ) Governor Kazuo Ueda addressed the Japanese parliament on Friday, declaring that he is “not considering selling long-term Japanese government bonds” (JGBs). A tool for changing interest rates.” He stated that any reduction in JGB purchases would only account for 7-8% of the balance sheet, which is a negligible decrease. Ueda went on to say that if the economy performs as expected, there may be a period in which interest rates are raised somewhat.
