USDJPY rallies on BoJ’s inaction, US Dollar strength

Markets turn volatile during early Friday as the Bank of Japan (BoJ) led moves join the US Dollar’s broad recovery, backed by upbeat US data. Adding strength to the momentum are the headlines surrounding the First Republic Bank (FRB) and China. 

Apart from the BoJ and geopolitics, the cautious mood ahead of the Federal Reserve’s favorite inflation number, namely the US Core PCE Price Index, also weighs on the sentiment and allow the US Dollar to remain firmer.

With this, USDJPY rises the most in one month to print the fresh high in seven weeks whereas AUDUSD justifies its risk barometer status as softer Aussie inflation clues propel dovish RBA concerns.

Prices of Crude Oil are intraday gains whereas Gold prints a three-day downtrend and is on the verge of posting the second consecutive weekly loss.

Elsewhere, BTCUSD struggles after rising in the last three consecutive days whereas ETHUSD remains mildly bid for the fourth day in a row.

Following are the latest moves of the key assets:

• Brent oil trims intraday gains near $78.80 during the two-day rebound from the monthly low.
• Gold price drops for the third consecutive day, to $1,982 by the press time.
• USD Index braces for the second weekly gain, up 0.40% intraday near 101.80 at the latest.
• Wall Street closed with notable gains but couldn’t propel the Asia-Pacific shares. That said, equities in Europe and the UK are mildly offered during the initial hour.
• BTCUSD and ETHUSD grind higher around $29,500 and $1,930 as we write.

BoJ, geopolitics and Fed hawks entertain traders

Although the BoJ hasn’t offered anything out of the box as it kept the monetary policy unchanged despite a change of Governor, a slight edit in the BoJ statement and economic outlook appears to drown the JPY and allow the USD to cheer recent hawkish Fed bets. Also fueling the greenback could be the BoJ’s mentioning of financial market stress, as well as the latest news that US policymakers are rushing to tame another likely banking crisis, this time linked to FRB. Furthermore, China’s sustained defense of Taiwan and criticism of outside forces to help the claimed territory also weigh on the risk profile and allow the US Dollar Index to rise.

On Thursday, downbeat US GDP couldn’t disappoint the greenback as details suggested firming price pressure and scope for the Fed to delay its policy pivot. However, welcome earnings from the tech giants tamed the USD’s gains, despite allowing the US currency to remain firmer.

Elsewhere, Aussie PPI came in softer and confirmed an extended pause of the RBA whereas upbeat sentiment figures from New Zealand and the UK failed to propel the NZDUSD and GBPUSD. That said, USDJPY is the leading G10 pair marking the USD’s heavy gains and JPY’s all-around weakness.

Gold prices struggle to justify traditional safe-haven status whereas Oil couldn’t cheer hopes of no more supply cuts from the OPEC+ group, despite posting mild gains in the last two days.

On a different page, BTCUSD and ETHUSD grind higher as industry players brace for a tough fight with regulators. Adding strength to the cryptocurrencies are supply cuts and cyclical moves.

• Strong buy: USDJPY
• Strong sell: ETHUSD, GBPUSD
• Buy: USD Index, USDCAD, Nasdaq, EURUSD
• Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

US PCE inflation eyed ahead of next week’s central bank moves

While the risk catalysts, BoJ and Fed hawks occupy the driver’s seat to propel the US Dollar, today’s US Core PCE Price Index will be crucial for the greenback to register weekly gains amid increasing hopes of higher rates for longer. Should the inflation clues remain firmer, as they did in recent times, the US Dollar will enter the key central bank week with a high head and may trigger the much-awaited pullback in commodities, as well as in Antipodeans. 

It should be observed that GDP data from Eurozone and Canada can also entertain market players but may not gain major attention.

May the trading luck be with you!