Yen Gains After Japanese Inflation Data; Markets Await US CPI
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ce. Meanwhile, the Dollar remained steady against other major currencies ahead of the release of critical U.S. inflation data, which could shape the Federal Reserve’s upcoming interest rate decisions.
Yen Rises Amid Japanese Inflation Momentum
The Yen climbed 0.19% to 151.685 per Dollar after reaching 152.18 overnight, its strongest level since late November. Japan’s corporate goods price index (CGPI) rose 3.7% year-over-year in November, surpassing market expectations of 3.4%. This marks the fastest annual increase since mid-2023 and reinforces the case for the BOJ to consider tightening its monetary policy. Market-implied odds of a BOJ rate hike on December 19 now stand at 27%.
Bart Wakabayashi of State Street noted that the data provides a "very defendable position" for a rate hike, though the broader strength of the U.S. economy continues to underpin the Dollar. He added that the Dollar-Yen pair is more likely to test the 155 level than retreat to 145 in the near term.
Dollar Steady Ahead of US CPI
The U.S. Dollar Index edged higher to 106.38 after touching a one-week high in the prior session. Traders anticipate November's Consumer Price Index (CPI) report to show a 0.3% monthly increase in both headline and core inflation. Should the data confirm these expectations, it could raise concerns about the pace of Federal Reserve rate cuts in 2024, providing additional support for the Dollar.
Market participants currently assign an 85% probability to a 25-basis-point cut at the Fed’s December 18 meeting, though any surprises in inflation data could alter this outlook.
Antipodean Currencies Struggle
The Australian Dollar weakened further, trading near a four-month low at $0.6373, weighed down by dovish signals from the Reserve Bank of Australia (RBA). The RBA's Deputy Governor is expected to clarify the bank's stance later today, but traders have increased bets on a February rate cut to 62%.
Similarly, the New Zealand Dollar fell to $0.5794, its weakest level in over a year, as market sentiment remained subdued.
European and Canadian Currencies
The Euro held steady at $1.0527 ahead of the European Central Bank’s policy decision on Thursday, where at least a quarter-point rate cut is widely expected. The British Pound eased slightly to $1.2764, while the Swiss Franc softened as markets priced in a 61% chance of a half-point rate cut by the Swiss National Bank.
The Canadian Dollar hovered near a 4.5-year low at C$1.4195 per U.S. Dollar, with the Bank of Canada expected to announce a half-point rate cut later in the day.
Market Outlook Traders are now focused on today’s U.S. CPI report, which will provide further insight into the Fed’s monetary policy trajectory. In the meantime, Japan’s inflation data has positioned the Yen as a potential outperformer, while commodity-linked currencies like the Aussie and Kiwi remain under pressure amid mixed global economic signals.
Yen Rises Amid Japanese Inflation Momentum
The Yen climbed 0.19% to 151.685 per Dollar after reaching 152.18 overnight, its strongest level since late November. Japan’s corporate goods price index (CGPI) rose 3.7% year-over-year in November, surpassing market expectations of 3.4%. This marks the fastest annual increase since mid-2023 and reinforces the case for the BOJ to consider tightening its monetary policy. Market-implied odds of a BOJ rate hike on December 19 now stand at 27%.
Bart Wakabayashi of State Street noted that the data provides a "very defendable position" for a rate hike, though the broader strength of the U.S. economy continues to underpin the Dollar. He added that the Dollar-Yen pair is more likely to test the 155 level than retreat to 145 in the near term.
Dollar Steady Ahead of US CPI
The U.S. Dollar Index edged higher to 106.38 after touching a one-week high in the prior session. Traders anticipate November's Consumer Price Index (CPI) report to show a 0.3% monthly increase in both headline and core inflation. Should the data confirm these expectations, it could raise concerns about the pace of Federal Reserve rate cuts in 2024, providing additional support for the Dollar.
Market participants currently assign an 85% probability to a 25-basis-point cut at the Fed’s December 18 meeting, though any surprises in inflation data could alter this outlook.
Antipodean Currencies Struggle
The Australian Dollar weakened further, trading near a four-month low at $0.6373, weighed down by dovish signals from the Reserve Bank of Australia (RBA). The RBA's Deputy Governor is expected to clarify the bank's stance later today, but traders have increased bets on a February rate cut to 62%.
Similarly, the New Zealand Dollar fell to $0.5794, its weakest level in over a year, as market sentiment remained subdued.
European and Canadian Currencies
The Euro held steady at $1.0527 ahead of the European Central Bank’s policy decision on Thursday, where at least a quarter-point rate cut is widely expected. The British Pound eased slightly to $1.2764, while the Swiss Franc softened as markets priced in a 61% chance of a half-point rate cut by the Swiss National Bank.
The Canadian Dollar hovered near a 4.5-year low at C$1.4195 per U.S. Dollar, with the Bank of Canada expected to announce a half-point rate cut later in the day.
Market Outlook Traders are now focused on today’s U.S. CPI report, which will provide further insight into the Fed’s monetary policy trajectory. In the meantime, Japan’s inflation data has positioned the Yen as a potential outperformer, while commodity-linked currencies like the Aussie and Kiwi remain under pressure amid mixed global economic signals.