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USD/JPY jumps as BoJ’s news sent JPY lower

The BoJ's new leader announcement this week could lead to further losses for the JPY.

The USD advanced against the Japanese yen today, capitalizing on the JPY weakness as the USD/JPY pair was the only major pair with a stronger greenback during the EU session on Monday.

The new BoJ leader announced soon

Reuters stated on Monday, citing sources, that the Japanese Upper House of Parliament has set confirmation hearings for the new Bank of Japan (BoJ) governor and his two deputies for February 27.

On Tuesday, February 14, the Japanese Cabinet is likely to formally propose professor Kazuo Ueda as the new Governor of the Bank of Japan (BoJ), along with two deputies from each house of parliament.

Tetsuya Inoue, Ueda’s former staff secretary during his term as a member of the Bank of Japan’s monetary policy board, stated that Ueda would likely let the data dictate the central banks’ next steps in monetary policy.

US inflation data on the agenda

Consumer sentiment at the University of Michigan increased from 64.9 to 66.4 on Friday. Yet, according to the University, recent events have led to a mixed attitude among shoppers, whose mood remains far below the historical norm.

Additionally, the 12-month inflation forecasts of consumers increased from 3.9% to 4.2%. Furthermore, the US BLS updated inflation figures for the final three months of 2022 higher.

Tuesday will witness the release of the most recent US consumer price index. Prices are expected to have increased by 0.4% in January, accelerating from the 0.1% increase in December. As a result, CPI inflation likely eased to 6.2% annually, down from 6.5% in December and a 40-year peak of 9.1% in June of last year. It would be the lowest yearly growth rate since October 2021.

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Moreover, Thursday will bring the Producer Price Index (PPI) for January, which measures inflation from the perspective of manufacturers and wholesalers. In January, producer prices likely increased 0.4%, following a 0.5% fall in December. Annual price rise most likely slowed to 5.4% from 6.2% in December, marking the weakest year-over-year increase since March 2021.

Suppose this week’s inflation readings end up above expectations. In that case, it might cause investors to reconsider whether the Fed will really cut rates this year, especially in light of the month’s robust employment report.

Recent market sentiment has been more hesitantly alarmed that ongoing core/services inflation may allow the disinflationary process to progress more slowly than previously anticipated. If verified, this may potentially place a floor under global core yields. Current money market rates discount a Fed cycle high rate of around 5.20%

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