Japanese Yen Looks Past CPI as Markets Eye Fed at Jackson Hole

Talking Points:

  • Japanese inflation data cautiously fell below economists’ expectations in July
  • Bank of Japan is unlikely to make policy adjustment in near-term as inflation remains below 2%
  • Markets and Japanese Yen eye the upcoming Jackson Hole Central Bank Symposium

The Japanese Yen did not have significant price movement against its US counterpart as local CPI data showed a 0.9% annualized headline price growth rate. This fell short of the 1.0% forecast. The market’s response to the new data indicates that other factors are possibly playing a more significant role in influencing the Yen’s movement.

The BOJ is not likely to significantly alter its monetary policy in the near future with its focus chiefly on achieving a 2% inflation target. The price growth rate (excluding fresh food) stood at just 0.8% as of July, also worse than the 0.9% expected outcome. Overnight index swaps are currently pricing in a 32.3 percent probability of a Bank of Japan could hike rates by July of 2019.

Looking ahead, the markets are now focusing on the upcoming Jackson Hole Central Banking Symposium. Fed Chairman Jerome Powell will be discussing the economy and monetary policy on Friday at 14:00 GMT and may boost the US Dollar. Markets are also closely watching developments of the US-China trade war and its implications on global growth and influences on Fed monetary policy.

Yen-Dollar movement - 5 Minute Chart

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— Written by Dimitri Zabelin, Junior Currency Analyst

To contact Dimitri, use the comments section below or @Zabelin.Dimitri on Twitter

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