- Bets that the Bank of Japan might end the negative interest rates as early as the March 18-19 meeting continues to underpin the Japanese Yen and weigh on the USD/JPY pair.
- Inflation in Tokyo moved back above the BoJ's 2% target in February and an upward revision of the Q4 GDP print suggested that Japan's economy avoided a technical recession.
- Data released this Tuesday showed that the Producer Price Index in Japan rose 0.2% MoM in February vs. a flat reading last month and the yearly rate climbed from 0.2% to 0.6%.
- Investors also seem convinced that the annual wage negotiations will yield bumper pay hikes for the second straight year and allow the BoJ to pivot away from its ultra-dovish stance.
- Japan's Finance Minister Shunichi Suzuki said that positive developments are seen in Japan's economy, though a stage has not been reached where Japan can avoid falling back into deflation.
- BoJ Governor Kazuo Ueda will speak in the parliament again this Tuesday from 02:00 GMT and should infuse volatility around the JPY crosses, allowing traders to grab short-term opportunities.
- The US Dollar continues with its struggle to attract any meaningful buyers amid growing acceptance that the Federal Reserve will start easing its monetary policy in the coming months.
- The bets were reaffirmed by the mixed US monthly jobs report on Friday, which showed a spike in the unemployment rate to a two-year high and kept the door open for a June rate cut.
- The yield on the benchmark 10-year US government bond touched a five-week low on Monday and languishes near the 4.0% mark, which further keeps the USD bulls on the defensive.
- Traders now look to the US consumer inflation figures for cues about the likely timing and the pace of the Fed's rate-cutting cycle before placing fresh directional bets around the USD/JPY pair.
- The headline CPI is anticipated to edge higher to 0.4% in February and the yearly rate is expected to hold steady at 3.1%, while the Core CPI is seen easing to the 3.7% YoY rate from 3.9% previous.
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