Japan’s Tokyo Consumer Price Inflation (CPI) fell below expectations early Friday, complicating the upcoming rate call and Monetary Policy Report by the Bank of Japan (BoJ). Tokyo CPI inflation only rose 1.8% on an annualized basis in April, compared to the previous print of 2.6%, surprising markets that were expecting stability.
In the US, Gross Domestic Product (GDP) also disappointed investors on Thursday by slowing down more than anticipated. Additionally, Personal Consumption Expenditure (PCE) inflation remained higher than desired in the first quarter, dampening hopes for Federal Reserve (Fed) rate cuts.
The US PCE Price Index inflation data due later on Friday will provide further insights into US inflation trends. The forecast for the US MoM Core PCE Price Index numbers for March is expected to remain steady at 0.3%.
With the Japanese Yen (JPY) hitting multi-year lows, the BoJ is considering potential interventions to support the weakening currency. Reports suggest that the central bank may discuss intervention options to stabilize the Yen.
In the currency markets, the USD/JPY pair is trading near 156.00, reaching multi-year highs as the Yen continues to depreciate. Bullish momentum is driving the pair towards record levels beyond 160.00, a level not seen since 1990. The USD/JPY pair is set to close bullish for the fourth consecutive month, with a 10.4% increase in 2024.
Overall, the economic data from Japan and the US is influencing market sentiment and driving currency movements, particularly in the USD/JPY pair. Investors are closely monitoring inflation figures and central bank actions to gauge future market trends.