12 September 2024, USD/JPY
An event to look out for today:
15:30 GMT+3. USD - Number of Initial Jobless Claims
USDJPY:
The USD/JPY pair broke its two-day losing streak, trading near 142.70 during European hours on Thursday. The Japanese yen (JPY) remains subdued following remarks from Bank of Japan (BoJ) board member Naoki Tamura.
BoJ board member Tamura said that ‘there is no tentative idea on the pace of further rate hikes’. Unlike in the US and Europe, rate hikes in Japan are expected to be gradual. The exact timing of when short-term rates in Japan may reach 1% will depend on economic and price conditions at that time.
USD/JPY growth may be driven by growing expectations of a smaller Fed interest rate cut in September. August US Consumer Price Index (CPI) data showed that core inflation fell to a three-year low. This development raised the likelihood that the Federal Reserve (Fed) will begin its easing cycle by lowering the interest rate by 25 basis points in September.
The U.S. consumer price index fell to 2.5 per cent year-on-year in August from a previous reading of 2.9 per cent. The index fell short of the expected 2.6%. Meanwhile, the core consumer price index was 0.2% for the month. The core CPI, excluding food and energy prices, was unchanged at 3.2% y/y. On a monthly basis, the core CPI rose to 0.3% from the previous reading of 0.2%.
According to the CME FedWatch Tool, markets are expecting a Fed rate cut of at least 25 basis points (bps) at the September meeting. The probability of a 50 bps rate cut has dropped sharply to 15.0% from 44.0% a week ago.
Trading recommendation: We follow the level of 142.95, if the level strengthens above, we consider Buy positions, if the level rebounds, we consider Sell positions.
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