The USDJPY currency pair was trading down over 450 pips as the Japanese yen crushed the US dollar following the latest US inflation data released by the US Bureau of Labor Statistics. According to the latest CPI report, US core inflation fell to 0.3% in October from the 0.5% recorded in September.
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The USDJPY currency pair was trading down over 450 pips as the Japanese yen crushed the US dollar following the latest US inflation data released by the US Bureau of Labor Statistics. According to the latest CPI report, US core inflation MoM fell to 0.3% in October from the 0.5% recorded in September.
Investors celebrated the inflation data, given that the US Federal Reserve has stubbornly refused to follow the clues provided by headline inflation numbers, choosing instead to focus on the core inflation data. Now that the core inflation data, which does not include the highly volatile food and fuel prices, is finally falling, the Fed will have no choice but to start tapering its rate hikes.
Many experts have warned that the data released by the Bureau of Labor Statistics is lagging and that the core inflation has already fallen significantly. Finally, the lagging indicators used by the Fed now support the conclusions reached by other economists and market experts.
The USDJPY currency pair recorded the most gains as the yen finally got breathing room as many anticipate weaker Fed rate hikes. Many currencies rallied against the US dollar, given that most central banks have been playing catch up to the Federal Reserve and can now breathe as the dollar losses some of its bullish momenta.
The US headline inflation print MoM came in at 0.4% in October, missing analyst estimates of 0.6%, with the annualised print coming in at 7.7% from the previous figure of 8.2%, marking a significant 0.5% decline.
The surge in US initial jobless claims to 225,000 from the 218,000 recorded last week also contributed to the dollar’s weakness, reflecting the weakening job market that had underpinned the Fed’s aggressive rate hikes.
The continuing jobless claims also rose significantly as many companies laid off workers due to the harsh economic conditions in the United States. The dollar’s weakness could continue as other leading currencies are long overdue for a relief rally.
