The Japanese Yen (JPY) holds onto gains following the Tokyo Consumer Price Index (CPI) data release by the Statistics Bureau of Japan. Traders are unwinding carry trades ahead of the Bank of Japan meeting, where interest rates and bond purchase details will be discussed.
Japan’s currency diplomat, Masato Kanda, highlighted the negative impact of FX volatility on the economy at the G20 meeting. Meanwhile, the US Dollar may find support from strong economic data, reducing rate cut expectations for September.
Key Market Movements
- Headline Tokyo CPI for July increased by 2.2% YoY.
- US GDP grew at an annualized rate of 2.8% in Q2.
- Markets show an 88.6% probability of a 25-basis point rate cut at the September Fed meeting.
Technical analysis shows USD/JPY hovering around 154.00, with potential support at 153.50 and resistance at 154.50. The BlackRock Investment Institute remains bullish on Japan’s equity market, while JP Morgan predicts no rate hike from the Bank of Japan.
Inflation FAQs
Inflation measures the rise in the price of goods and services, with Core CPI excluding volatile elements. Higher inflation usually leads to stronger currencies due to increased interest rates. Gold’s relationship with inflation has evolved, with lower inflation being positive for the precious metal.