USD hits 30-year high vs JPY following US inflation rate data

USD/JPY hits highest level since 1990

The USD/JPY currency pair experienced a notable rally, soaring above 152.00 and reaching a peak unseen since 1990. This remarkable ascent reflects the US dollar’s strong position in forex markets, influenced by prevailing economic indicators and investor sentiment towards the US economy. With growing speculation for continued high US interest rates, the gap between 5.5% rates (US) and 0% (Japan) is causing a particularly large shift in demand for US dollar over the Japanese yen.

USD higher vs EUR, GBP, AUD

Following the release of higher-than-expected CPI inflation data, the euro, British pound, and Australian dollar each depreciated significantly against the US dollar, losing over 100 pips. This movement underscores the US dollar’s dominance and the impact of inflation rates on currency strength.

CPI inflation rate 0.1% higher than expected

The Consumer Price Index (CPI) for March revealed core and headline inflation rates of 3.8% and 3.5% respectively, slight increases of 0.1% over forecasts. Such marginally higher inflation rates suggest persistent price pressures, potentially influencing central bank policies and forex trading strategies.

Interest rates rise, Fed cuts delayed

Yields on the 10-Year Treasury reached 4.5%, and the likelihood of the Federal Open Market Committee (FOMC) lowering interest rates in June diminished from 60% to 20%. Without a rate cut in June, it will be harder for the Fed to maintain their expected plan of 3 rate cuts in 2024. Increased yields signal concerns over inflation and economic growth in real time, affecting forex market dynamics and trader expectations ahead of central bank decisions.

EUR/USD breaks below 1.0750

As the US dollar strengthens, the EUR/USD pair plunged below the 1.0750 mark, approaching year-to-date lows. This depreciation highlights the euro’s vulnerability to shifts in USD strength as the Euro Area looks to begin cutting rates in coming months – most likely before the US.