USD/JPY climbs to 1990 highs on hot US inflation data

AUD firms above 0.6500, Dollar Index (DXY) edges higher

Summary

Stronger than expected Inflation data in the US, which accelerated to 3.5% for the second month running, lifted the Dollar Index to 105.23, a 5-month high.

The DXY, which measures the value of the Dollar against a basket of 6 major currencies, eased to 104.95 at the New York close.

The US March Headline CPI rose to 0.4% month-on-month, higher than estimates at 0.3%. Economists had expected annual inflation in March to climb to 3.4%.

US bond yields extended their gains, with the 10-year Treasury yield settling at 4.59% from 4.53% previously.  It was the highest close for the benchmark bond yield since November 2023.

The USD/JPY pair climbed to an overnight and fresh 34-year high at 153.32 before easing to settle in late New York at 153.22. Japan’s Chief Cabinet Secretary Yishimasha Hayashi said he “won’t rule out any steps to respond to excessive FX moves.”

The Australian Dollar (AUD/USD) firmed above 0.65 cents to 0.6537 despite a firmer Greenback, outperforming its peers. Supported by the firm Aussie, New Zealand’s Kiwi (NZD/USD) finished at 0.5997, modestly up from 0.5985 previously.

Sterling (GBP/USD) edged higher to 1.2557 (1.2545) while the Euro (EUR/USD) eased to 1.0727 from 1.0745 previously. The shared currency slumped to an overnight low at 1.0699.

The ECB kept its Main Refinancing Rate unchanged, at 4.50% as expected. ECB President Christine Lagarde reiterated that the central bank will not pre-commit to a particular rate path.

Against the Asian and Emerging Market Currencies, the US Dollar weakened modestly. The USD/CNH pair (Dollar-Offshore Chinese Yuan) dipped to 7.2545 from 7.2575. Against the Singapore Dollar, the Greenback (USD/SGD) eased to 1.3530 from 1.3545.

Other economic data released saw the US March Headline Producer Price Index (PPI) come in less than expected month on month at 2.1% against estimates at 2.2%. The softer than expected PPI data weighed on the US currency, paring the Dollar’s climb.

Claims for Unemployment Benefits in the US for April dipped to 211K from 212K, better than estimates at 215K.

USD/JPY – The Greenback continued to climb against the Japanese Yen, trading to an overnight and 1990 high at 153.32 before easing to close at 153.22 (152.87 previously). Despite more intervention rhetoric from Japanese officials, the USD/JPY kept its bid.

AUD/USD – The Aussie Battler rallied despite broad US Dollar strength, finishing at 0.6537 from 0.6517 yesterday. Overnight, the Australian Dollar traded to a high at 0.6553 before easing. The overnight low recorded was 0.6502.

EUR/USD – Pressurized by the robust US Dollar, the shared currency slumped to an overnight low at 1.0699 before rallying to 1.0725 in late New York (1.0745 yesterday). The Euro traded to an overnight high at 1.0757.

GBP/USD – Sterling ground higher to finish at 1.2557 in New York, up from 1.2545 yesterday. The British Pound soared to an overnight high at 1.2579 before easing. The overnight low recorded for the GBP/USD pair was 1.2511.

On the lookout

Welcome to Friday. Today’s light economic calendar kicks off with New Zealand’s March Business NZ PMI (f/c 50 from 49.3 – ACY Finlogix). China follows with its March Balance of Trade (Surplus f/c +USD 70.2 billion from +USD 125.16 billion – ACY Finlogix). Japan follows with its February Industrial Production Final (m/m f/c -0.1% from -6.7%; y/y f/c -3.4% from -1.5% - ACY Finlogix).

Germany starts off Europe with its German March Inflation Rate (m/m f/c 0.4% from 0.4%; y/y f/c 2.2% from 2.5% - ACY Finlogix). The UK follows with its February Industrial Production (m/m f/c 0% from -0.2%; y/y f/c 0.6% from 0.5% - ACY Finlogix), UK February Manufacturing Production (m/m f/c 0.1% from 0%; y/y f/c 0.6% from 0.5% - ACY Finlogix), UK February Goods Trade Balance (f/c -GBP 14.5 billion from -GBP 14.515 billion – ACY Finlogix) and UK February GDP (m/m f/c 0.1% from 0.2%; y/y f/c -0.4% from -0.3% - ACY Finlogix).

France follows with its March Inflation Rate (m/m f/c 0.2% from 0.9%; y/y f/c 2.3% from 3% - ACY Finlogix). The US rounds up today’s data releases with its US March Export Prices (m/m f/c 0.3% from 0.8% - ACY Finlogix), US March Import Prices (f/c 0.3% from -0.3% - ACY Finlogix), and finally US Michigan Preliminary April Consumer Sentiment (f/c 79 from 79.4 – ACY Finlogix).
Federal Reserve FOMC members, Ralph Bostic and Mary Daly are scheduled to speak at various functions later today (Saturday morning, 13 April in Sydney)

Trading perspective

Traders now expect the Federal Reserve to start easing borrowing costs in September instead of June, which lifted the Greenback in late New York trade. The Dollar Index (DXY) climbed to fresh 2024 highs, at 105.23 before easing to finish at 104.95. The US Michigan Preliminary April Consumer Sentiment as well as Fed speak from the FOMC’s Bostic and Daly are in the limelight today.

Expect the Dollar to maintain its bullish bias consolidating gains at current levels.

USD/JPY – With the Dollar climbing to fresh 1990 highs against the Yen, expect more jawboning from Japanese officials today. The USD/JPY settled at 153.23. Look for immediate resistance at 153.35 (overnight high traded was 153.32). The next resistance level is at153.65. On the downside, look for immediate support at 152.90 followed by 152.60 and 152.30. Expect more choppy trade today, likely between 152-154. Intervention fears should keep the Dollar in check. The risk today may be lower.

AUD/USD – The Aussie Battler outperformed, finishing up against the Greenback at 0.6537. Immediate support lies at 0.6500 (overnight low traded was 0.6502). The next support level is found at 0.6470. Immediate resistance is at 0.6555 (overnight high was 0.6553) The next resistance level is at 0.6585. Look for the Aussie to trade a likely range today of 0.6480-0.6580. Preference is to sell Aussie on strength.

EUR/USD – The shared currency extended its fall against the Greenback, settling at 1.0725. Immediate support today lies at 1.0700 followed by 1.0670. Immediate resistance can be found at 1.0755 (overnight high traded was 1.0757). The next resistance level lies at 1.0785. Look for the Euro to consolidate in a likely range today of 1.0685-1.0785. Trade the range, nice and wide.

GBP/USD – Sterling rallied modestly to 1.2557 in late New York, up from 1.2545 previously. Look for immediate resistance today at 1.2580 (overnight high traded was 1.2579). The next resistance level is found at 1.2610. Immediate support lies at 1.2520 followed by 1.2490. Look for the British Pound to trade a likely range today of 1.25-1.26. Speculative Sterling shorts should keep a base to the GBP/USD pair.

Happy Friday and trading all. Have a top weekend ahead.

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