- USD/JPY has printed a fresh four-week high above 134.00 as investors have started turning cautious ahead of US inflation.
- US core inflation is expected to remain persistent amid robust demand for labor.
- Japanese firms are failing in hiking the prices of offerings amid weaker retail demand despite an increase in wage growth.
The USD/JPY pair has printed a fresh four-week high at 134.04 in the Asian session. The upside bias for the asset is the outcome of a recovery in the US Dollar Index (DXY) as investors have started turning anxious ahead of the release of the United States inflation data and the continuation of the Bank of Japan’s support to expansionary monetary policy.
The USD Index is attempting to defend testing of the 102.00 support as investors are routinely getting nervous ahead of US Consumer Price Index (CPI). The demand for US government bonds continues to remain choppy ahead of US inflation. The yields on 10-year US Treasury bonds are hovering around 3.43%.
Meanwhile, S&P500 futures have continued their sideways performance as investors are preferring a postponement of positions in equities ahead of the quarterly result season. Stock-specific action is highly likely in the S&P500 ahead.
Analysts at Wells Fargo expect, “After rising 0.4% in February, we look for the CPI to moderate to a 0.2% gain in March. With the initial surge in oil/gasoline prices stemming from Russia’s invasion of Ukraine a full year behind us, CPI when measured on a year-over-year basis should fall to 5.1% in March from 6.0% in February. However, another elevated reading in the core CPI is likely to indicate that the recent trend in inflation is little improved. Excluding food and energy, we look for the CPI to rise 0.4% and remain close to 5% on a three-month annualized basis.
On the Tokyo front, inflation expectations have been trimmed as the Producers Price Index (PPI) has been trimmed. Stagnant performance has been observed on a monthly basis as expected. While annual PPI softened further to 7.2% from the prior release of 8.0% but remained higher than the consensus of 7.1%. This conveys the inability of firms in hiking the prices of goods and services amid weaker retail demand despite an increase in wage growth.
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