USD/JPY extends its upside above  156.50 ahead of US CPI, Retail Sales data

May 15, 2024 12:44 am

  • USD/JPY extends the rally around 156.55 in Wednesday’s early Asian session. 
  • Fed’s Powell said central bank will keep rates on hold for an extended period as inflation eases slower than expected. 
  • Japanese government will closely work with the BoJ on FX market and will take all possible measures if necessary.

The USD/JPY pair trades in positive territory for the fourth consecutive day near 156.55 on Wednesday during the early Asian session. The uptick of the pair is bolstered by the speculation that the Federal Reserve (Fed) might maintain rates higher for longer amid the elevated inflation. However, the fear that Japanese authorities could intervene in the foreign exchange markets might cap the upside of USD/JPY. 

The Fed Chair Jerome Powell reiterated Tuesday that inflation is easing slower than expected, and the April PPI figure provided more justification to keep rates higher for longer. Nonetheless, Powell further stated that he does not expect the Fed to raise rates. The hawkish remarks from Fed officials might boost the US Dollar (USD) and create a tailwind for USD/JPY. 

On Tuesday, the Bureau of Labor Statistics revealed that the US Producer Price Index (PPI) rose 2.2% YoY in April, compared to the 1.8% increase in March (revised from 2.1%) and matching the expectation. Meanwhile, the Core PPI, excluding volatile food and energy costs, jumped 2.4% YoY in the same period, compared to an increase of 2.1% in March. On a monthly basis, the PPI and the core PPI both rose 0.5% MoM in April.

Looking ahead, investors will focus on the US Consumer Price Index (CPI) and Retail Sales reports for April. These reports could offer insights into the timing of the Fed’s initial rate adjustment. 

On the JPY’s front, Finance Minister Shunichi Suzuki said on Tuesday that the Japanese government will closely work with the Bank of Japan (BoJ) on the foreign exchange (FX) market and will take all possible measures if necessary. The fear of further FX intervention from Japanese authorities might provide some support to the Japanese Yen (JPY) and cap the pair’s upside. 

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