Japanese CPI is Out: Key Levels
Rowan Crosby • 2 min read
Japanese CPI is out and the results are a little mixed. Core CPI came out better than expected at 0.9% vs 0.8%, which is a good result. However, the headline was a touch lower at 0.9% vs 1.0% expected.
This at least is ticking higher although this is the same reading as the prior month. We have to remember that the BOJ is aiming for an inflation target above 2%, so we are a long way off. Those figures are annual YoY CPI numbers, so that goes to show you what we are dealing with here.
As ever the USD/JPY is basically unchanged on the session and hasn’t been all that responsive to the data. It has been a long, long period of weak inflation and these numbers won’t be changing anything on any level.
Yesterday, the Yen did bounce a fair bit as there was some USD strength coming into the session late. The real catalyst for that was the expectation that the FOMC would be less dovish when they meet next week. We all know that they are expecting to see a rate cut coming and a 25bp reduction is now firmly locked in.
Over the last two months, the USD/JPY really hasn’t been able to break one way or another. Yesterday the 108.00 level held up and we really haven’t seen price drop below 107.00.
With the FOMC, looking to cut rates, there has been clearly pressure to the downside, but overall the Yen has held strong.
The obvious target is 109.00 above and if they are going to perhaps cut rates once and then wait and see, that could really spur on the bulls here. That is a realistic scenario given the jobs data remains strong. But we will know more when we get the first look at US GDP later today, which has fallen away sharply over the last 12 months and ironically since the Fed started hiking rates.