Japanese Yen weakens as softer Tokyo CPI and Iran tensions counter intervention warnings

USD/JPY attracts some buyers during the Asian session amid a combination of supporting factors.
Softer Tokyo CPI comes amid economic risks due to Middle East tensions and undermines the JPY.
The Fed’s hawkish tilt and the US-Iran stalemate revive USD demand, further supporting the pair.

Haresh Menghani FXStreet

The USD/JPY pair is seen building on the previous day's late rebound from the vicinity of mid-155.00s, or over a two-month low, and gaining some positive traction during the Asian session on Friday. The momentum lifts spot prices to the 157.25 region in the last hour and is sponsored by a combination of factors.

Following a brutal reaction to heightened verbal intervention by Japanese authorities, the Japanese Yen (JPY) meets with a fresh supply amid economic concerns stemming from Middle East tensions. Investors remain worried that Japan's economy will come under strain in the near future due to the continued disruption to energy supplies through the Strait of Hormuz. The concerns were further fueled by reports that the US is considering new military strikes on Iran amid stalled peace talks.

Meanwhile, consumer inflation in Tokyo – Japan's capital city – missed forecasts across all measures in April and remained below the Bank of Japan's (BoJ) 2% target for a third straight month. This gives the central bank more reasons to pause despite the June rate hike signals earlier this month, offsetting a jump in Japan's Manufacturing PMI to its highest since January 2022, and does little to impress the JPY bulls. Apart from this, a modest US Dollar (USD) uptick supports the USD/JPY pair.

The US Federal Reserve's (Fed) decision to hold its key policy rate unchanged at 3.50%-3.75% on Wednesday saw the highest number of dissents since 1992, with three policymakers voting against the accommodative tone in the statement. Furthermore, the Advance US GDP report indicated that the largest economy expanded by 2.0% annualized pace during the first quarter of 2026. This was higher than the 0.5% growth in the previous quarter, indicating continued economic resilience.

Adding to this, the US inflation accelerated in March due to the war-driven surge in Oil prices, bolstering expectations that the Fed could keep interest rates unchanged well into next year. This, along with persistent geopolitical uncertainties, assists the USD to rebound following the overnight slump to a one-and-a-half-week low, which turns out to be another factor lending support to the USD/JPY pair. Traders now look forward to the US ISM Manufacturing PMI for a fresh impetus.

Economic Indicator

Tokyo CPI ex Food, Energy (YoY)

The Tokyo Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households in the Tokyo region. The index is widely considered as a leading indicator of Japan’s overall CPI as it is published weeks before the nationwide reading. The gauge excluding food and energy is widely used to measure underlying inflation trends as these two components are more volatile. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

GBP/USD defends 1.3300 after strong UK PMI data

Following Thursday's sharp decline, GBP/USD clings to small gains above 1.3300 in the American session on Friday, supported by the upbeat UK Retail Sales and July PMI data. Nevertheless, the pair's upside remains capped as investors cling to a cautious stance amid a further escalation of tensions in the Middle East. The US July PMI data failed to trigger relevant price action.

EUR/USD remains below 1.1400 after mixed US PMIs

EUR/USD pressures daily lows below the 1.1400 mark in the American session on Friday. Mixed S&P Global PMIs, as manufacturing output contracted while services activity expanded in July, triggered no relevant market reaction. The focus remains in Middle East developments and inflation-related concerns.

Gold holds above $4,050 but momentum still missing

Gold builds on its modest intraday bounce and climbs above the $4,050 level on Friday, hitting a fresh daily high amid a modest US Dollar pullback. The fundamental backdrop, however, warrants some caution before confirming that the pullback from an over two-week high, touched on Wednesday, has run its course and positioning for any meaningful upside.

Ethereum: Derivatives interest in ETH improves, but signs of caution remain

Ethereum is hovering slightly below the $1,900 level, down 3% on Thursday following a slight expansion in derivatives interest. The top altcoin's open interest has increased to 14.60 million ETH, marking a 600K ETH increase over the past two days and its highest level since June 7.

XRP retreats as ETF interest cools

Ripple (XRP) slides toward the short-term $1.10 support on Friday, as broader crypto market sentiment weighs on crypto assets. The sell-off mainly stems from fears of inflation in the United States (US) amid the ongoing war in the Middle East and rising Oil prices.

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.