Japanese Yen: CPI risks dominate against US Dollar – MUFG

FXStreet Insights Team FXStreet

MUFG’s Lee Hardman and Abdul-Ahad Lockhart note that recent US Dollar (USD) resilience and higher US yields have created a tougher backdrop for FX carry trades, while commodity-linked currencies lag. They highlight that today’s United States (US) Consumer Price Index (CPI) is pivotal for the Federal Open Market Committee (FOMC) outlook, with a hot print seen pushing USD/JPY towards 161.00–162.00 and a soft reading pulling it back below 160.00.

CPI outcomes mapped to USD/JPY levels

"At the same time, the recent pick-up in US yields and stronger US dollar has created a more challenging backdrop for carry trades in the near-term."

"With the distribution of outcomes unusually wide, today’s CPI release carries heightened potential for outsized market moves relative to recent data prints."

"A hot CPI print (>4.3%) today would likely trigger a sharp sell-off in US front-end rates as markets price in a higher probability of further Fed tightening, potentially pulling forward expectations for a hike towards October."

"The USD would rally on widening rate differentials, pushing USD/JPY up towards 161.00–162.00."

"While a soft print (<4.0%) would trigger lower US yields and a weaker US dollar pulling USD/JPY back below 160.00."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

EUR/USD holds ground near 1.1550 ahead of US Inflation data

EUR/USD is holding ground at around 1.1550 in the European session on Wednesday. The pair takes advantage of the profit-taking pullback in the US Dollar as traders reposition ahead of the critical US CPI inflation data. However, any upside attempts could be limited amid renewed US-Iran tensions.

GBP/USD keeps range near 1.3400, with eyes on US CPI

GBP/USD clings to minor recovery gains near 1.3400 in Wednesday's European trading, though it remains in a familiar range heading into the US CPI event risk. Traders keep an eye on developments around the Middle East crisis, which could ramp up volatility in the major.

Gold languishes near March low, below $4,200 as traders await US CPI report

Gold maintains its heavily offered tone through the first half of the European session and currently trades near its lowest level since March 23, around the $4,180-$4,175 region. Renewed hostilities between the US and Iran fuel inflationary concerns and bolster bets for more hawkish central banks.

Cardano's downtrend deepens despite on-chain bottoming signals

Cardano edges lower to $0.1600 signaling a potential extension of the 30% loss from last week. The altcoin remains under intense selling pressure, weighing on its retail support. Still, a spike in dormant supply re-entering circulation signals that the selling pressure has run its course, a pattern that often precedes a rebound.

US CPI data set to show inflation at three-year high in May, backing Fed hawkish tilt

The US Bureau of Labor Statistics will publish the May Consumer Price Index (CPI) data on Wednesday. The report is expected to show another step up in consumer inflation, driven by the persistently high Oil prices due to the ongoing crisis in the Middle East.

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.