US Inflation Data Weakens USD/JPY
The Japanese Yen has strengthened against the US Dollar after softer-than-expected inflation data from the United States. The US Personal Consumption Expenditures (PCE) Price Index showed that annual headline inflation remained unchanged at 3.4% in August, below the 3.7% expected by markets.
The core PCE Price Index, which excludes volatile food and energy components, also remained steady at 3% YoY, below the 3.3% market forecast. The softer inflation figures add to stronger US economic data, including a private-sector employment increase of 90K jobs in September, exceeding expectations.
As a result, markets are reassessing the timing of a potential further tightening by the Federal Reserve (Fed). Investors now assign around a 35% chance to a rate increase in October, down from nearly 51% a day earlier. However, markets still expect another Fed rate increase, which could provide some support to the US Dollar.
The USD/JPY pair remains on the back foot, trading around 156.80 at the time of writing. Technical analysis suggests that sellers still have the upper hand, with immediate resistance located at the 200-period SMA at 157.58.