Market Analysis

USD/JPY weakens below 146.50 after Japanese National CPI data, BoJ’s Ueda speech

Dupoin UK · 23 Aug 20241K Views

The USD/JPY pair is trading weaker, hovering around 146.20 during the early Asian session on Friday. The Japanese Yen (JPY) has gained ground following the release of the National Consumer Price Index (CPI) inflation data and a speech by Bank of Japan (BoJ) Governor Kazuo Ueda. Market participants will be paying close attention to US Federal Reserve Chair Jerome Powell’s address at the Jackson Hole Symposium later today.

Data from the Japan Statistics Bureau on Friday showed that Japan's headline National CPI increased by 2.8% YoY in July, matching the growth rate from June. Core inflation, which excludes fresh food prices, rose to 2.7% YoY from 2.6% previously, aligning with market expectations and potentially renewing speculation about a BoJ interest rate hike, thereby supporting the JPY against its peers.

The “core-core” inflation rate, excluding both fresh food and energy prices, fell to 1.9% YoY in July, down from 2.2% in June, marking the lowest level since September 2022.

BoJ Governor Kazuo Ueda's hawkish remarks have also contributed to the JPY's strength. Ueda stated that the Japanese economy is progressing as anticipated toward the price stability target and suggested that the central bank may adjust its policy if the economic trajectory remains as planned.

Conversely, markets are anticipating that the Federal Reserve will begin easing its policy in September. Recent minutes revealed that most Fed members are in favor of a rate cut next month. According to the CME FedWatch Tool, there is approximately a 76% probability of a 25 basis point cut in September, with expectations for a total reduction of one percentage point by the end of the year.

Federal Reserve Bank of Boston President Susan Collins remarked on Thursday that it may soon be time to start reducing rates, with future cuts dependent on incoming data. Kansas City Fed President Jeff Schmid noted that he is closely monitoring the factors behind the rising unemployment rate and will let data guide his decision on potential rate cuts next month. All eyes are now on Powell's speech later today, which may provide further insight into the future direction of US interest rates.

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