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USD/JPY slips as US PCE data and tariff concerns curb Greenback’s momentum

  • USD/JPY retreats after a two-day rally that pushed it to its highest level in eight weeks.
  • US core PCE inflation rose 0.2% MoM in August, in line with forecasts.
  • The US Dollar Index eases from three-week highs as traders react to US PCE and tariff headlines.

The Japanese Yen (JPY) firms against the US Dollar (USD) on Friday, with USD/JPY taking a breather after a sharp two-day rally that had propelled it to its strongest level since August 1 on Thursday.

At the time of writing, the USD/JPY pair is trading around 149.50, as the Greenback’s recent rally loses momentum. The US Dollar Index (DXY), which gauges the Greenback’s value against six major peers, is easing from three-week highs and trading near 98.18 as traders react to the latest Personal Consumption Expenditures (PCE) inflation data.

US inflation data released on Friday came in broadly in line with expectations. The core PCE Price Index, the Federal Reserve’s (Fed) preferred gauge of underlying price trends, rose 0.2% month-on-month in August, down from July’s originally reported 0.3% (revised to 0.2%), while the annual core rate held steady at 2.9%.

The headline PCE index rose 0.3% MoM, matching forecasts, and the yearly rate edged up to 2.7% from 2.6% in July, indicating that headline price pressure remains persistent even as core inflation stabilizes.

The University of Michigan Consumer Sentiment Index slipped to 55.1 in September from 55.4 in August, while the Consumer Expectations Index edged down to 51.7 from 51.8. The survey’s 1-year inflation expectation eased slightly to 4.7% from 4.8%, and the 5-year inflation expectation declined to 3.7% from 3.9%.

In Japan, data released earlier on Friday showed that the Tokyo Consumer Price Index (CPI), a leading indicator of nationwide trends, showed inflation rose 2.5% YoY in September, the same pace as in August after that month’s figure was revised down to 2.5% from 2.6%.

The core CPI excluding fresh food also rose 2.5% YoY, undershooting market expectations of 2.8%, while the measure that excludes both food and energy slowed to 2.5% YoY from 3.0% in August.

Beyond the data, market uncertainty resurfaced as tariff headlines returned to unsettle investors. Traders digested fresh trade-policy friction after US President Donald Trump announced on Thursday that, starting October 1, the US will impose a 100% tariff on branded or patented pharmaceutical products not made in America, a 50% tariff on kitchen cabinets and bathroom vanities, a 30% tariff on upholstered furniture, and a 25% tariff on heavy trucks manufactured abroad. The renewed trade tensions dented risk appetite and curbed demand for the Greenback even as inflation figures came broadly in line with expectations.

Author

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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