- The Japanese Yen (JPY) rose, recovering yesterday’s losses
- US-China trade framework agreed
- The US Dollar (USD fell against its major peers
- US CPI rose 2.4% YoY vs 2.5% expected
The US dollar against the Japanese yen (USD/JPY) exchange rate is falling after yesterday’s gains. The pair rose 0.17% in the previous session, settling at 144.85. At 21:30 UTC, USD/JPY is -0.23 % lower at 144.51 and in a range of 144.33 to 145.47.
The end is gaining ground on diverging Bank of Japan and Federal Reserve expectations as the US announces a trade framework with China. While Beijing has yet to agree on the framework, it would include China supplying rare earths and minerals, while the US will allow Chinese students into its colleges and universities.
The US will apply a total of 55% tariffs to Chinese goods – the 25% from previously, plus 30% from this term, in the White House. China will apply 10% trade tariffs on US goods.
The US Dollar is falling across the board. The US Dollar Index, which measures the greenback against a basket of major currencies, is -0.45% lower at 98.65 at the time of writing, after gains yesterday.
The U.S. dollar is falling as the market considers the U.S.-China trade agreement and the latest US inflation data.
US inflation, as measured by the consumer price index (CPI), rose less than expected in April. The CPI rose 2.4% year over year, up from 2.3% in April, but less than the 2.5% that more economists had forecast. On a monthly basis, the CPI rose 0.1% compared to the previous month, down from 0.2% previously.
Core inflation held at 2.8% for the third straight month, holding its lowest pace since it surged in the spring of 2021.
The markets had expected tariff increases to start showing up in the CPI this May; however, that wasn’t the case. It could be that businesses are absorbing some of the costs for now in the hope that import duties will come back down.
However, cool inflation is making it harder for the US Federal Reserve to explain why it’s not reducing interest rates.
