USD/JPY Slips to Near 146.20 as Japan’s Inflation Rises and Fed Considers Rate Cuts
The USD/JPY pair is trading lower around 146.20 in the early Asian session today. Japan’s Consumer Price Index (CPI) inflation for July showed an increase, raising expectations for a rate hike by the Bank of Japan (BoJ). Meanwhile, the Federal Reserve (Fed) is considering cutting rates, as indicated by Fed’s Collins and other members.
The National CPI in Japan rose by 2.8% year-on-year in July, in line with market expectations. Core inflation, excluding fresh food prices, also increased to 2.7% year-on-year. However, the "core-core" inflation rate, which excludes energy prices as well, decreased to 1.9% year-on-year, the lowest since September 2022.
BoJ Governor Kazuo Ueda’s optimistic comments on the Japanese economy further boosted the Yen. Ueda mentioned that the economy is on track with price target projections, and the central bank is prepared to adjust policy accordingly.
On the other hand, the Fed is leaning towards a rate cut in its upcoming September meeting, with around 76% odds of a 25 basis points cut. Fed officials like Susan Collins and Jeff Schmid have hinted at the possibility of rate cuts based on incoming data. All eyes are now on Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium for clues on the US interest rate trajectory.
In conclusion, the USD/JPY pair is facing pressure from rising inflation in Japan and potential rate cuts by the Fed. Traders need to monitor central bank decisions and economic data to navigate the currency pair’s movements effectively.