USD/JPY trades broadly calm near 145.00 ahead of US inflation data for May

USD/JPY is broadly stable around 145.00 ahead of the release of the US inflation data for May.
The US inflation is expected to have accelerated in May.
Investors expect the BoJ to hold interest rates at 0.5% by the year-end.

Sagar Dua FXStreet

The USD/JPY pair trades calmly around 145.00 during European trading hours on Wednesday. The pair oscillates in a tight range, with investors awaiting the United States (US) Consumer Price Index (CPI) data for May, which will be published at 12:30 GMT.

Ahead of the US inflation data, the US Dollar Index (DXY) wobbles around 99.00.

Investors will pay close attention to the US inflation data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook. As measured by the CPI, the headline inflation is estimated to have grown at a faster pace of 2.5% on year, compared to 2.3% in April. Year-on-year core CPI is also expected to have accelerated to 2.9% from the prior reading of 2.8%.

The inflation will indicate whether new economic policies announced by US President Donald Trump are prompting price pressures, assuming that the impact of higher tariffs imposed by Washington will be borne by domestic importers who will pass on the effect to households.

Meanwhile, trade tensions between the US and China appears to have de-escalated after a two-day meeting in London. US Secretary of Commerce Howard Lutnick has expressed confidence after the meeting that China would reverse export restrictions on “rare earths”.

On the Tokyo front, investors doubt whether the Bank of Japan (BoJ) will raise interest rates again this year. A Reuters poll in the June 2-10 period showed that a slight majority of economists expect the BoJ to keep interest rates steady at 0.5% by the year-end and will raise them in early 2026.

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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