Japanese Yen flatlines after CPI inflation report
The USD/JPY pair holds steady near 159.05 during the early Asian session on Friday. Growing speculation that the Bank of Japan (BoJ) could raise interest rates next month offsets the weaker Gross Domestic Product (GDP) data.
The USD/JPY currency pair remained relatively stable around 159.05 in the first part of the Asian trading day on Friday. The Bank of Japan (BoJ) may raise interest rates next month, which is fueling expectations despite a decline in GDP growth. The preliminary US Purchasing Managers Index (PMI) report will be closely followed on Friday.
Japan's National Consumer Price Index (CPI) inflation rose to 2.0% year-over-year in July from 1.6% in June (revised from 1.7%). The core CPI, which excludes volatile fresh food prices, increased by 1.8% year-over-year in July, up from 1.6% in the previous reading. This data could support arguments for a rate increase from the Japanese central bank.
Senior economist Masato Koike of Sompo Institute Plus suggested that core consumer inflation is expected to pick up due to renewed tension in the Middle East, which could drive up oil prices and add pressure from a weak yen, potentially leading to a BoJ rate hike in September. With an 80% chance of a BoJ rate hike according to overnight index swaps, the yen's value could be negatively impacted due to ongoing tensions in the Middle East.
These factors are creating a favorable environment for the yen, which is heavily dependent on oil imports from the Middle East.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
