Yen resumes losses after Ueda's statements
The Japanese yen fell on Wednesday in European trade against a basket of major rivals, and resumed its losses against the dollar after a short hiatus yesterday, and almost touched three-week lows following remarks by Bank of Japan Governor Kazuo Ueda.
Earlier Tokyo data showed Japanese services prices slowed down in February, indicating a slowdown in inflationary pressures on policymakers, and hurting the odds of a May rate hike.
The Price
The USD/JPY pair rose 0.4% today to 150.44 yen per dollar, with a session-low at 149.84.
The yen rose 0.55% yesterday against the dollar, the first profit in four days away from three-week lows at 150.94.
Ueda
Bank of Japan Governor Kazuo Ueda said ahead of the Diet that the BOJ should hike interest rates if food prices continue to rise and lead to wide-spread national inflation.
He said that recent “very high inflation” in Japan is likely prompted by transient factors, such as higher import and good costs, which will likely dissipate and shouldn’t impact monetary policies.
He said the important factors to consider here are sustained wage growth, which started with big corporations and should be analyzed to see if it spreads to smaller companies.
Services Prices
Japanese services prices rose 3.0% in February, down from 3.2% in January, and below estimates of 3.1%.
Slower services prices indicate that inflation is tapering off, which reduces the odds of interest rate hikes.
Japanese Rates
Following the data, the odds of a Bank of Japan 0.25% rate hike in May fell to 40%, with investors now waiting for more inflation, unemployment, and wages data from Japan to gather more clues.
A Reuters survey showed analysts expect the next interest rate hike by the BOJ to occur in the third quarter, likely in July.
Wall Street climbs as investors assess latest trade developments
US stock indices gained ground today as markets follow the latest developments on Trump tariffs.
According to the Wall Street Journal, Trump's upcoming tariffs will be more contained than expected and will exempt certain sectors.
President Trump announced yesterday a 25% tariff on any country that buys oil from Venezuela.
Trump also renewe his calls for the Fed to cut rates as he implements his tariff strategy.
Otherwise, Atlanta Fed President Raphael Bostic expects only a single interest rate cut in 2025, down from two cuts in previous forecasts.
On trading, Dow Jones rose 0.2% as of 15:01 GMT to 42660 points, while S&P 500 rose 0.3% to 5783 points, as NASDAQ added 0.5% to 18273 points.
Gold moves higher as the $3000 barrier holds
Gold prices rose in European trade on Tuesday for the first time in four sessions, moving towards a record high on strong buying momentum around the historical $3000 barrier.
The markets are now waiting for important US data later today, in addition to remarks by some Fed officials as investors seek more clues on the path of interest rates this year.
Prices
Gold prices rose 0.35% today to $3021 an ounce, with a session-low at $3007, after losing 0.4% on Monday, the third loss in a row on profit-taking away from a record high at $3057.
Gold is also pressured by the higher dollar and US treasury yields following strong services data.
US Rates
Atlanta Fed President Raphael Bostic said he expects inflation to slow down in upcoming months, with the Fed likely cutting interest rates by only 25 basis points this year.
According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in May stood at just 11%.
The odds of such a cut in June stood at 63%.
SPDR
Gold holdings at the SPDR Gold Trust fell 1.44 tons yesterday to a total of 929.07 tons, away from June 21, 2023 highs.