At the beginning of the Asian trading session on Wednesday, USD/JPY flipped its script. It bottomed to test the important support level of 147.00. Japan’s Producer Price Index (PPI) inflation data was released, with a huge month over month growth of 4% for April. After this announcement, a drop was seen. The stronger-than-expected PPI figures have sparked speculation that the Bank of Japan (BoJ) may need to consider raising interest rates sooner than anticipated.
Indeed, the Japanese Yen’s swift reversal from a dangerous trough coincides with a broadening recovery in global risk sentiment. A new tariff agreement between the United States and China has kicked up hopes among market players. Consequently, they are taking their bets out of safe haven assets such as gold and the Yen. A lot of the impetus behind this rapid change in sentiment has come from the easing of US-China trade tensions, sending riskier assets soaring.
As traders come to terms with what the agreement between the US and China means for the markets, the USD/JPY continued to feel pressure. Though analysts still maintain a bullish USD/JPY bias, with much of that optimism being credited to the recently-signed trade deal. This is occurring despite the US Dollar being on the backfoot after yesterday’s weaker consumer price index (CPI) data inflation data.
The negative gold prices indicate the shift in market dynamics with the commodity flirting around $3,245 (trading negative) in the early Asian session. This wave of positive risk sentiment has pressured gold prices lower. Investor sentiment has quickly turned to favor equities and other risk-on assets.
AUD/USD has ranged under 0.6500 through Wednesday’s Asia trade. Traders are looking for further clues from the Fed’s discussions later today, as the currency market remains rife with volatility.
Market participants have set their eyes on the USD/JPY rates and gold prices. You add to that a world and an environment shaped entirely by geopolitical factors, as well as economic data releases.
“US-China trade truce only emphasizes timeless investing truths.” – www.fxstreet.com