USD/JPY experienced a sell-off on Thursday, driven by a stronger-than-expected Producer Price Index (PPI) from Japan, which reaffirmed expectations for a Bank of Japan (BoJ) rate hike. Concurrently, the release of a hot US Consumer Price Index (CPI) tempered bets for Federal Reserve rate cuts, favoring USD bulls. In a parallel development, former President Donald Trump ordered a 25% import tax on all steel and aluminum entering the United States, escalating trade tensions with Europe.
The stronger Japanese PPI print provided fresh impetus to the yen, attracting sellers to the USD/JPY currency pair. As market participants adjusted their expectations for BoJ policy changes, traders remained cautious. Meanwhile, the robust US CPI data diminished prospects for additional easing by the Federal Reserve, supporting USD bulls and tempering expectations of imminent rate cuts.
Trump's imposition of a 25% tariff on steel and aluminum imports added another layer of complexity to the global economic landscape. As policymakers in Europe weighed their response, trade tensions inched closer to the continent. The situation underscored the importance of strategic trade negotiations and heightened geopolitical risks.
Despite these developments, a positive risk tone bolstered the Australian dollar, with AUD/USD remaining within a familiar range below 0.6300. This range was near a two-week high reached before the US CPI release on Wednesday. Traders noted subdued demand for the USD, providing support to the Aussie amid broader market dynamics.
Gold prices sought to build on the previous day's bounce from the post-US CPI trough. Traditional safe-haven assets, underpinned by Trump-related anxieties and geopolitical risks, saw renewed interest from investors. The softer USD further lent support to bullion, as market participants looked to hedge against potential economic uncertainties.