JPY “revives”. Overview for 16.05.2024

The Japanese yen, paired with the US dollar, has significantly strengthened. The current exchange rate for USDJPY stands at 153.88.

The yen found support as the US dollar fell. Following the release of inflation data the previous day, the likelihood of a Federal Reserve interest rate cut increased markedly. Inflation in April slowed to 3.4% y/y from the earlier 3.5%, with the core CPI dropping to 3.6% y/y from 3.8%. This easing of inflationary pressure provides grounds for anticipating a greater potential for a Fed rate cut in September.

Consequently, the dollar retreated, enabling the yen to regain its position.

However, the morning’s GDP statistics for Japan failed to inspire confidence. The economy contracted by 2.0% year-on-year in Q1 2024, surpassing the expected 1.5% decline. The downturn was 0.5% on a quarter-to-quarter basis, higher than the projected -0.3%. The report shows that weak private consumption emerged as the primary driver behind the GDP fall, marking a decline for four consecutive quarters.

Meanwhile, yen investors remained undeterred by the report, preoccupied with market corrections.