The USD/JPY currency pair fell hard, testing the 147.00 level at the Asian session on Wednesday. This movement follows a disturbing opening salvo of Japanese Producer Price Index (PPI) inflation data. It reflected a huge increase of 4% for the month of April. The numbers have driven financial market speculation about soon-to-be-announced policy shifts by the Bank of Japan (BoJ).
In the very recent trading, the Japanese Yen reversed very sharply. The PPI figures were above the consensus expectations, stressing firm inflationary pressures, which could see the BoJ forced to raise interest rates earlier than currently expected. The market’s reaction underscores the increasing scrutiny on Japan’s economic indicators amid shifting global conditions.
The financial markets responded strongly as investors began to feel more confident, with the United States and China coming to a tariff resolution. Accordingly, safe-haven assets came under pressure. An unexpected US-China trade truce has restored bullish investor confidence as the two countries focus on showing each other respect and dignity in their ongoing deliberations. In a statement, analysts point out that this contract represents some ageless investing wisdom and realities.
“US-China trade truce only emphasizes timeless investing truths” – www.fxstreet.com
An optimistic outlook has recently emerged for the USD/JPY pair. This optimism has taken hold, particularly on the heels of recent developments in US-China relations. The greenback comes under pressure amid the release of soft U.S. Consumer Price Index (CPI) data on Tuesday. This too has raised alarms about what the Federal Reserve might do next to change the direction of monetary policy.
Although USD/JPY swings were at times drastic, it was not the only currency pair that had trouble moving in a singular direction. During the Asia session on Wednesday, the AUD/USD pair remained firmly above the 0.6500 level. Even with Australian Wage Price Index data beating expectations, it found it difficult to gain traction. Traders are looking at comments from Federal Reserve officials later today. Taken together, these statements would greatly influence market perception in a positive way.
Gold prices mirrored the risk-off sentiment, trading in the red territory near $3,245 during early morning trading hours. The newly rosy risk appetite stemming from the US-China accord pushed up demand for both equities and other risk-on assets. In response, gold fell sharply.