USD/JPY impacted after weak PPI reading, soaring Red Sea tensions

With a loss of 0.40%, the USD/JPY pair is currently trading at 144.70, pushed by the lacklustre Producer Price Index (PPI). The US Dollar has been battered by disappointing PPI data for December, while growing tensions in the Red Sea region may bring demand back to the US Dollar.

The US Final Demand Producer Price Index reported a 1% annual rise in December, slightly above 1.3% market projection. However, the US economy shows an upward trend in overall inflation, with the Consumer Price Index rising from 3.1% to 3.4% annually.

If the Fed is to control it, this could entail higher interest rates, which could limit losses in US dollars. Retreating weekly jobless claims indicate robust labour market conditions, which could support the central bank’s hawkish language.

Markets fear an escalation in the hostilities in the Red Sea, which might lead to safety in the Greenback and push the pair higher.