Original Article by VT Markets: “As the US Inflation Data Emerged, the Dollar Gained Strength, Pushing USD/JPY Close to 159.00”
Link to original article: [VT Markets Forex Update](https://www.vtmarkets.com/live-updates/as-the-us-inflation-data-emerged-the-dollar-gained-strength-pushing-usd-jpy-close-to-159-00/)
Rewritten and Expanded Article:
Title: US Inflation Report Strengthens the Dollar, Drives USD/JPY Near 159.00 Level
On June 13, 2024, the foreign exchange markets responded dynamically to new U.S. economic data, as higher-than-expected inflation readings provided fresh momentum to the U.S. dollar. Traders recalibrated their expectations for Federal Reserve policy following the data release, and currency pairs involving the dollar experienced significant movements. One of the most notable pairs, USD/JPY, surged close to the 159.00 level, a high not seen in decades, reflecting investors’ confidence in the dollar’s growing strength.
The macroeconomic landscape continues to evolve rapidly, and the latest inflation data solidifies an increasingly hawkish sentiment surrounding the Federal Reserve’s policy trajectory. Let’s break down what fueled the U.S. dollar’s ascendancy and explore the technical and fundamental implications for major forex pairs.
US May Inflation Data Lifts the Dollar
The key driver of the dollar’s momentum was the release of U.S. inflation figures for May 2024. Contrary to analysts’ hopes for a slowing of inflationary pressures, both headline and core inflation data came in above expectations. This not only indicated the persistence of underlying price growth but also challenged the notion that the Federal Reserve could cut rates in the near term.
Key inflation highlights:
– The Consumer Price Index (CPI) rose 0.6% month-over-month, exceeding economist expectations of a 0.4% rise.
– On a year-over-year basis, inflation climbed to 3.5%, compared to the forecasted 3.3%.
– Core CPI, which strips out food and energy prices, increased by 0.5% for the month and stood at 3.8% on an annual basis.
These figures were interpreted by markets as evidence that inflation remains entrenched, thereby strengthening the case for the Fed to maintain higher interest rates for an extended period. The data drove traders to recalibrate their interest rate forecasts, pricing out the likelihood of any rate cut before late 2024.
Currency Market Implications
The foreign exchange market reacted promptly to the inflation data. The U.S. Dollar Index (DXY), which measures the dollar’s value against a basket of other major currencies, climbed sharply. The USD/JPY pair was among the most affected, surging to just under the 159.00 level, the highest in nearly 34 years.
Other currency pairs also saw notable movements:
– EUR/USD declined to the 1.0700 area as investors favored the dollar over the euro, especially with the European Central Bank (ECB) recently initiating its first rate cut.
– GBP/USD dipped below 1.2700, influenced by both dollar strength and concerns ahead of the upcoming U.K. general election.
– AUD/USD weakened significantly as divergent monetary policies between the Reserve Bank of Australia and the Fed came into sharper focus.
USD/JPY Nears Multi-Decade High
The standout performer in Thursday’s session was USD/JPY, which approached the critical 159.00 resistance zone. This came amid both dollar strength and yen weakness, as the Bank of Japan (BoJ) continued to maintain ultra-loose monetary policies—much in contrast with rising U.S. Treasury yields.
Technical factors contributing to the USD/JPY rally:
– Breakout from resistance near 157.50.
– Limited speculative selling in the 158.00 zone, allowing for a momentum-driven move upward.
– Lack of intervention from Japanese authorities despite verbal warnings about excessive
Explore this further here: USD/JPY trading.