16 May 2024, USD/JPY
An event to look out for today:
15:30 GMT+3. USD - Number of initial applications for unemployment benefits
USDJPY:
USD/JPY trimmed losses and traded near 154.00 in the early Asian session on Thursday. Weaker US CPI inflation data put pressure on the US dollar (USD). The major pair is recovering slightly after recent weaker than expected Japanese gross domestic product (GDP) data for the first quarter of 2024.
Japan's economy contracted in the first three months of 2024, according to the Cabinet Office data released on Thursday. Japan's preliminary GDP contracted 0.5% QoQ in the first quarter from 0.1 growth in the fourth quarter of 2023, weaker than expectations of a 0.4% contraction. On a year-over-year basis, GDP contracted 2.0% compared to forecasts of a 1.5% contraction and 0.4% expansion earlier. The Japanese yen (JPY) is attracting some sellers after a weaker-than-expected reading on Japanese GDP growth.
On Thursday, U.S. consumer price index (CPI) inflation eased to 3.4% y/y in April from a 3.5% rise in March, in line with market expectations. Core CPI inflation, which excludes volatile food and energy prices, declined to 3.6% y/y in April from a previous reading of 3.8%, in line with consensus, the US Bureau of Labor Statistics (BLS) said on Wednesday. In addition, U.S. retail sales were unchanged in April after rising 3% in March, below the market consensus forecast of 0.4%.
The softer inflation data raised the odds of a Federal Reserve (Fed) rate cut in 2024. Financial markets expect the Fed to wait for further evidence of improving inflation data. Fed Chairman Jerome Powell said on Tuesday that U.S. inflation may be more resilient than expected, forcing the Fed to hold the rate longer to reach its 2% target. Investors estimated the probability of a Fed rate cut in September 2024 at nearly 72%, up from 65% before the release of U.S. CPI data, according to CME's FedWatch tool.
Trading recommendation: Trade mainly with buy orders at the price level of 154.20. Consider sell orders at the price level of 153.70.
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