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August 12th - Data from the U.S. Department of Labor shows that U.S. electricity prices rose 4.2% in July compared to the same period last year. With many U.S. residents turning on air conditioning during the hottest month on record, higher electricity bills are expected. In recent months, electricity price increases have outpaced overall inflation, placing additional pressure on consumers energy expenditures on top of rising fuel costs.August 12th - According to CBS News, U.S. inflation slowed for the second consecutive month, rising 3.4% year-over-year in July, in line with economists expectations, indicating that some price pressures may be easing. Moodys Analytics chief economist Mark Zandi pointed out before the July CPI data release that the average daily gasoline price in July was about 10 cents lower than in June. Data from the U.S. Bureau of Labor Statistics also showed that gasoline prices fell 2.9% month-over-month in July. Zandi added that if there is no further escalation in the Iran war, inflation may have peaked and could continue to decline for the remainder of the year, potentially falling to near the Federal Reserves 2% annual inflation target by the same period next year.UBS said on August 12 that, overall, today’s US CPI report was quite close to our expectations and consistent with our previous view that US inflation peaked in May and is slowly declining, although this slowdown may be uneven.August 12th - Analyst David Uberti stated that inflation has cooled in recent months, partly due to a slight decline in gasoline prices. However, this situation is likely to change in August. Data from the U.S. Department of Labor shows that gasoline prices fell 2.9% month-over-month in July, while fuel oil prices fell 1.7%.August 12th - According to CNBC, Wednesdays CPI report showed that price increases for many goods and services slowed, potentially reducing the urgency for the Federal Reserve to raise interest rates in the near future. Data released by the U.S. Bureau of Labor Statistics showed that the Consumer Price Index (CPI) rose 0.1% month-over-month in July after seasonal adjustment. The core CPI, excluding food and energy prices, rose 0.2% month-over-month. Year-over-year, the CPI and core CPI rose 3.4% and 2.5%, respectively. Although inflation remains significantly above the Feds 2% target, the relatively modest monthly increase in July, coupled with similarly modest data in June, suggests that the energy-price-driven inflationary momentum from earlier this year is easing. However, prices remain highly volatile and vulnerable to ongoing developments in the Middle East.

Even as the BoJ vs. Fed Difference Remains in the Spotlight, USD/JPY Tracks Below 134.00 on Lackluster Yields

Alina Haynes

Apr 17, 2023 14:02

USD:JPY.png 

 

As Monday begins in Tokyo, USD/JPY falls from its intraday high and stabilizes around 133.80. As a consequence, the Yen pair is unable to extend its previous day's gains due to lax market conditions preceding this week's key data/events. In addition to a paucity of significant data or events, USD/JPY traders have recently struggled with inconsistent triggers and sluggish returns.

 

The previous day, USD/JPY reached its highest level in a week as primarily positive US data dampened expectations for a policy shift and rate cut by the Federal Reserve (Fed) in 2023. Despite this, US retail sales decreased by 1.0% in March compared to the predicted -0.4% decline and February's -0.2% decline. As opposed to the 0.2% market consensus and previous reading, Industrial Production increased by 0.4% in the month in question. The preliminary result of the University of Michigan's (UoM) Consumer Confidence Index for April, which increased to 63.5 from 62.0 analysts' expectations and previous readings, was also encouraging. In addition, inflation forecasts for the next year increased from 3.6% in March to 4.6% in April, while inflation forecasts for the next five years decreased by 2.9% during the same month.

 

Previously, the USD/JPY pair increased due to hawkish Fed discussions. In an interview with Reuters on Friday, Raphael Bostic, president of the Atlanta Federal Reserve (Fed), stated that "recent developments are consistent with one more rate hike." According to Reuters, Fed Governor Christopher Waller discussed this topic and stated that additional rate hikes are necessary because the Fed has not made significant progress toward its inflation objective. In an interview with CNBC on Friday, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, stated that he still needs to examine the statistics. The lawmaker said, "However, let's keep in mind that we've raised a lot of money; some of the delay may be reflected in today's retail sales number."

 

In contrast, the USD/JPY pair was able to maintain its strength due to the new Governor of the Bank of Japan (BoJ), Kazuo Ueda, who supports the Japanese central bank's easy-money policy.

 

Recent geopolitical tensions between China and the United States over Taiwan, as well as China's desire to collaborate with Russia to enhance regional and global security, have weighed on the USD/JPY pair and agitated the market.

 

S&P 500 Futures struggle to find a clear direction amidst these wagers following Wall Street's pessimistic close, as bond yields remain neutral despite weekly gains.

 

The preliminary readings of the US PMIs for April and the Japanese National Consumer Price Index (CPI) for March will be crucial to monitor going forward. The previously mentioned risk factors and central banker comments are also significant.


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