USD/JPY Higher As CPI Boosts Jumbo Hike

The USD/JPY pair is struggling around 130.00 but is likely to accelerate as the higher than expected CPI data boosts the bets of a mega rate hike by the US central bank in June. Market estimates conceived CPI at 8.1%, lower than the former reading of 8.5%. While the print of 8.3%, higher than the estimates has further clarified that the Fed has a long battle to fight against inflation and a hawkish tone will be clearly exhibited From now on.

It is possible to conclude that the inflation is near its peak level and now the traders could expect a diminishing rate journey led by higher rates and a quicker balance sheet reduction process. Core CPI that excludes food and energy prices has landed at 6.2% higher than the estimates of 6%, denotes that higher energy bills and food prices are not the only expenses impacting American household incomes.

The US dollar index is attempting to sustain above 104.00 as higher-than-expected CPI has worsened the situation for Fed policymakers. On Japan’s front, yen is exhibiting relative strength after one weak. The situation of value bet is supporting the yen bulls against the US dollar.  Although the situation is not expected to persist longer as the BOJ will continue to stick with its ultra-loose monetary policy, which will dampen the demand for yen sooner rather than later.