In the Asian session, the USD/JPY pair rose to a fresh four-week high of 134.04. The asset’s upward momentum is due to the recovery of the US Dollar Index (DXY), as investors are becoming increasingly anxious ahead of the release of US inflation data and the continuation of the Bank of Japan’s expansionary monetary policy support.
Investors are concerned about the upcoming US Consumer Price Index (CPI), causing the demand for US government bonds to remain unstable, with yields on 10-year US Treasury bonds hovering around 3.43%.
Meanwhile, S&P500 futures are trading sideways, as investors are postponing positions in equities ahead of the quarterly result season. Stock-specific action is highly likely in the S&P500 ahead.
According to analysts at Wells Fargo, the CPI is expected to moderate to a 0.2% gain in March, after rising 0.4% in February. The core CPI may indicate that the recent trend in inflation is little improved. Excluding food and energy, the CPI is expected to rise 0.4% and remain close to 5% on a three-month annualized basis.
On the Tokyo front, inflation expectations have been reduced, as the Producers Price Index (PPI) has been trimmed, and stagnant performance has been observed on a monthly basis. The annual PPI softened to 7.2% from the prior release of 8.0%, indicating the inability of firms to hike prices of goods and services despite an increase in wage growth.
