The rate of USD to Yen fell 4 cents last week on weaker US jobs numbers but the trend is turning bearish and today’s CPI numbers from the US are helping push USD/JPY higher. The US Consumer Price Index (CPI) report for February revealed stronger-than-expected inflationary pressures, with prices rising at a faster pace than forecast. The core CPI, which leaves out food and energy inflation, increased by 0.4% last month, surpassing the 0.3% predicted. This unexpected acceleration in inflation led to a 30-40 pip increase in the US dollar, indicating a positive reaction from currency markets.

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The trend is reversing for USD/JPY

This is a mixed report after all. One thing that strikes out is that the owner’s equivalent rent was raised again, along with the rent. These components, as well as the increase in energy prices, contributed significantly to the February inflation increase. Airfares increased by 3.6%, auto insurance by 0.9%, and used vehicles by 0.5%, while medical care declined by 0.1%. The three-month annualised rate increased to 4.1% in February from 3.9% in January, while the six-month annualised rate increased to 3.8% from 3.5%. On a three-month annualised basis, CPI core services ex-housing (“supercore”) rose by 6.9% in February.

US February CPI Inflation Report

Headline measures:

• Consumer Price Index (CPI) year-on-year (y/y) increased by 3.2%, surpassing the expected 3.1%.
• Month-on-month (m/m) CPI rose by 0.4%, meeting expectations.
• Core CPI, which excludes volatile food and energy prices:
  • Month-on-month (m/m) core CPI increased by 0.4%, higher than the expected 0.3%.
  • Year-on-year (y/y) core CPI stood at 3.8%, slightly below the expected 3.7%.

Additional details:

• Shelter costs increased by 0.4% month-on-month, compared to 0.6% in the previous month.
• Services less rent of shelter saw a 0.6% month-on-month increase, consistent with the prior month.
• Real weekly earnings remained unchanged at 0.0%, compared to a revised figure of -0.4% in the previous period.
• Food prices were stable month-on-month, while year-on-year food inflation stood at 2.2%.
• Energy prices increased by 2.3% month-on-month but declined by 1.9% year-on-year.
• Rents rose by 0.5% month-on-month, while owner’s equivalent rent increased by 0.4%.

• Full report

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