The US dollar declined against the yen yesterday following reports of lower-than-anticipated monthly and annual inflation data. The market now expects the US Fed to slow down its rate hike cycle. The Japanese economic data was not impressive. However, the market was predominantly focused on the US inflation data. Overall, the USD/JPY pair declined from a high of 134.05 to a low of 132.75 in the past 24 hours.
According to Japan’s Cabinet Office, the country’s core machinery orders declined by 4.50% m-o-m in February following an increase of 9.50% in the previous month and slightly better than forecasts of a 6.40% decline.
Non-manufacturing orders fell by 14.70%, led by a 54.70% drop in construction and a 29.10% decline in finance and insurance. Transportation and postal activities dipped by 20.30%, while agriculture, forestry, and fishing decreased by 16.50%. Mining and quarrying of stone and gravel fell by 10%.
Also, manufacturing orders grew by 10.20% despite steep declines in several segments. Specifically, pulp, paper, and paper products fell by 41.70%. Likewise, ceramic, stone, and clay products declined by 29.4%, and iron and steel products fell by 21.80%.
On a y-o-y basis, private sector machinery orders surged 9.80% in February, up from a 4.50% rise in January and surpassing market expectations for a 2.90% increase.
The aggregate value of machinery orders gained by manufacturers operating in Japan fell by 0.80% m-o-m in February.
According to the Bank of Japan, the value of loans disbursed in the country rose by 3% y-o-y in March, declining from a 3.30% rise (22-month high) in February but missing forecasts of a 3.50% growth. Also, outstanding loans retained by Japan’s major, domestic, and “shinkin” banks remained at ¥600.40 trillion. With respect to the percentage of loans given by various banks in Japan, major and domestic banks recorded a gain of 3.30%, while “shinkin” banks added 1%.
According to the Bank of Japan, the country’s producer prices surged by 7.20% y-o-y in March, following an 8.30% jump in the previous month and a notch higher than forecasts of 7.10%. The reported figure is the lowest PPI rise since September 2021, reflecting the third successive month of a slowdown.
Lumber and wood posted a decline of 11.50% in March, while petroleum recorded a drop of 4.70%. On the contrary, inflation remained unchanged at 4.70% for chemicals. Beverages and foods recorded an increase of 8% in March. Likewise, iron and steel posted a jump of 18.50%. While plastics reported a steep rise of 18.30%, machinery posted an increase of 6.30%.
On a m-o-m basis, PPI remained unaltered in March following a 0.30% decline in February.
According to the US Bureau of Labor Statistics, the country’s consumer price index inched up 0.10% m-o-m in March following a 0.40% rise in the previous month but missed forecasts of 0.20% growth.
On a y-o-y basis, US inflation rose by 5% in March, down from 6% in the previous month and a notch lower than the 5.10% rise anticipated by economists. The reported figure represents the smallest annual increase since May 2021.
Excluding food and energy, the consumer price index inched up 0.40% m-o-m in March following a 0.50% rise in February. On a y-o-y basis, core inflation jumped 5.60% in March. The energy index fell by 6.40% y-o-y in March, while the food index surged 8.50% in the same period.
The lower-than-anticipated US inflation has given rise to expectations that the Fed will slow down its rate hike cycle. This is expected to keep the USD/JPY pair weak in the days ahead.
The historical price chart indicates that the USD/JPY pair is descending after facing resistance at 133.80. The next major support is anticipated only near 130.60. Additionally, the currency pair is trading below its 50-day moving average while the stochastic indicator is in the bearish zone. Therefore, we anticipate the USD/JPY pair to remain in a downtrend for the next few trading sessions.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
