USD/JPY returns to the levels seen before US CPI data release – Rabobank

The US Dollar (USD) dropped a bit following the release of the softer-than-expected US CPI inflation report on Wednesday. At the same time, the report made the Japanese Yen (JPY) stronger against the USD for a short period of time, Rabobank analysts note.

Market sees little scope for a hawkish surprise from the BoJ

“The drop in the value of the USD following the release of the softer than expected US CPI inflation report yesterday provided the JPY with a short-lived reprieve vs. the USD. A few hours later the headline news from yesterday’s FOMC meeting was that the dot plots are now only pointing to 1 Fed rate cut this year. This lent the USD some support.”

“That said, for the most part Fed officials would have made their decisions on their policy outlooks before yesterday’s data release. This understanding dulled the impact of the dot plots. Despite this USD/JPY has returned to the levels traded before yesterday’s US data release, with the JPY being the worst performing G10 currency on a 1-day view.”

“The soft stance of the JPY suggests the market sees little scope for a hawkish surprise from the BoJ at tomorrow’s policy meeting. The market’s bearish outlook on the JPY is an ongoing problem for Japanese policy makers, though it may present an opportunity for Governor Ueda to attempt to wrongfoot the consensus.”