USDJPY breaks out after CPI release

10 เม.ย.

Headline CPI for March jumps to 3.5% year-on-year, up from the 3.4% expected, and well above the 3.2% recorded in February. The latest reading is the highest since September’s 3.7%, and it has certainly rattled financial markets. Stock index futures sold off sharply, as did precious metals, while the US dollar soared. The yield on the US 10-year Treasury note jumped 13 basis points to hit its highest level since mid-November. Investors are once again recalibrating the probabilities of rate cuts this year. Having started the year expecting six 25 basis point rate cuts in 2024, investors had reduced their forecasts to a maximum of three cuts. But now two seems more likely, if that. And we may have to wait until September to get it. This comes after FOMC non-voting member Neel Kashkari said last week that there may be no cuts this year if inflation continues to move sideways. Having fallen steadily from a peak of 9.1% in the summer of 2022, Headline CPI hit 3.0% in June last year. But it has moved sideways ever since, and today’s release would seem to indicate that this ‘bump’ in inflation may be more serious, with the danger that we now continue to trend higher.

The USDJPY has soared above 152.00, with no sign of any intervention from the Bank of Japan to weaken the yen. Will they do something overnight? Or could it be that Hiroshi Watanabe (formerly Japan’s ‘Mr Yen’) was correct last week when he said there would be no FX intervention from Japan until the USDJPY hits 155.00?