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15/05/24
154
JPY Higher as US Inflation Falls More Than Anticipated
On Wednesday the Japanese yen gained. The yen rose as much as 1% but then gave up about 50% of these losses on the day. USD/JPY traded at about 155.73, 0.45% higher in the North American session.
Although headline inflation in the US didn’t fall by much, it was enough to push the US dollar lower against the major currencies. In April headline inflation lifted 0.3% m/m, slightly less than March’s 0.4% gain and the 0.4% market estimate.
Headline inflation fell to 3.4% annually, the same as market estimates and lower than March’s 3.5%. This was the first time in 4 months that inflation wasn’t higher than forecast.
Core CPI fell to 3.4% from 3.5% y/y and to 0.3 from 0.4% m/m. Both readings were the same as market estimates.
Investors were happy with the inflation report. Before the report, the chances of a rate cut in September were 64% and increased to 71% after the report. The markets have priced in two rate cuts fully before the end of 2024.
The inflation release didn’t indicate inflation would fall to the 2% target in the short term and on Tuesday Fed Chair Powell said the Fed would keep rates restrictive.
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