Fed Hike Bets Ease Amid Energy Price Strength

The EUR/USD and USD/JPY currency pairs are currently being affected by market expectations of a potential US interest rate hike. Despite recent bets on a Federal Reserve increase, the probability of at least one 25-basis-point hike is still around 80%, according to current market pricing.

However, it's worth noting that the impact of energy price strength on inflation has been relatively minimal compared to previous supply shock-driven surges. This could potentially influence market expectations and lead to a correction in risk-sensitive currency pairs.

The USD/JPY pair is particularly noteworthy as bulls have been clawing back since a recent intervention by the Bank of Japan and the US Treasury Department. The upcoming US CPI report will be crucial in determining the near-term outlook for this pair.