USD/JPY may fall either way in reaction to the US CPI report later today

Author: Justin Low | Category: News

The talk of the market is about the US January CPI report that is to come


And some unwelcome news for the BOJ is that the yen may strengthen further regardless of the outcome of the report.

The dollar is already generally weak on the day, and if the report surprises to the downside - it would mean that inflation isn't growing nearly as strong as the Fed projects it to be. That's bad news for the dollar. USD/JPY is expected to move lower in such an event.

On the flip side, if the report surprises to the upside, it would mean higher inflationary pressures and that will spur bond yields once again - which it turn will negatively impact equities and concerns about last week's rout will start creeping in. That will eventually lead to a safe haven play and USD/JPY is expected to move lower as well.

Frankly speaking, the worst thing that could happen is that the report comes in bang on expectations on all fronts. That is the known unknown in my view. A surprise to the downside or upside, we all can have a gauge of what may happen. But if there are no surprises at all, the market trade could be all over the place or we could just be left hanging in the balance clutching at straws.

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