Key Points:
- USD/JPY increased from 156.40 to 157.00 due to economic data from Japan and the US.
- Tokyo CPI inflation rose to 2.2% in May, a 26-month low, and retail trade increased by 2.4%.
- US Q1 GDP growth was 1.3%, sparking speculation of potential rate cuts.
In the early hours of Friday, the USD/JPY currency pair witnessed a notable rise, moving from 156.40 to 157.00. The market’s rise reflects responses to economic data from Japan and the US, highlighting inflation, consumer indices, and growth rates. The rise, although brief, set the tone for subsequent fluctuations in the trading day.
USD/JPY: Tokyo CPI Inflation 2.2% in May, Retail Surges 2.4%
Tokyo’s CPI inflation data for May showed a year-on-year increase of 2.2%, up from April’s 1.8%, released Friday. This marks a 26-month low, showcasing a significant slowdown in inflationary pressures. Japanese retail trade figures for May showed a stronger-than-expected increase of 2.4%. This surpassed the forecasted 1.9%.
Additionally, it revised the previous month’s 1.1%. These figures suggest a resilient domestic demand, which may influence the Bank of Japan‘s monetary policy decisions shortly.
US GDP 1.3%, PCE Inflation Key for Fed Policy
On the US front, the Gross Domestic Product (GDP) data released on Thursday revealed a Q1 growth of 1.3%, slightly lower than the previous 1.6%. This softer growth rate is contributing to increased speculation about potential rate cuts.
Furthermore, the US Core Personal Consumption Expenditure (PCE) Price Index inflation, expected to be 0.3% month-on-month, is a crucial indicator for the Federal Reserve’s monetary policy outlook. The mixed signals from these economic indicators have kept market participants on edge.
Market Bets on Rate Cuts as US GDP Slows to 1.3%
A market analyst noted that easing growth figures in the US are boosting hopes for rate cuts, maintaining a positive broad-market risk sentiment as Friday approaches. This sentiment is echoed in the CME FedWatch Tool, which indicates that rate markets are pricing in better-than-even odds of at least a quarter-point rate trim from the Federal Open Market Committee (FOMC) when it meets in September. These expectations are driving market behaviour, influencing currency movements and trading strategies.
USD/JPY Bullish Above 200-Hour EMA at 156.73
Technically, the USD/JPY experienced an initial rise to 157.00 early Friday but receded to 156.80 shortly after that. The currency pair is trading above the 200-hour EMA at 156.73, indicating a bullish trend in the short term. The weekly peak is 157.70, but a significant bearish candle on May 15, which saw a nearly 1.0% decline, highlights potential volatility. Despite this, the overall bullish outlook remains as the pair trades well above the 200-day EMA at 149.47.
