Inflation in Japan accelerated from 3% in June to a record 3.3% in July - yet the Bank of Japan continues to maintain a dovish monetary policy. Although speculative pressure on the BoJ is growing, today's strong US macro data and statements by the Fed's Bullard, known for his 'hawkish' viewpoint, supported the US dollar.
- The Fed's Bullard stressed that current estimates of the neutarl interest rate are uncertain, putting a question mark over whether policy needs further tightening. According to the St Louis Fed chair, the recovery of the U.S. economy could stall disinflation and hinder and delay the Fed's plan to cool price pressures to 2%;
- Today's macro data in the U.S. came in above expectations, with the Chicago Fed regional index indicating 0.12 points versus a forecast of -0.22 and -0.33 previously. Unemployment claims came in at 230,000 vs. 240,000 forecast and 239,000 previously;
- Japan's core consumer inflation in July was 3.1% vs. 3.3% previously (down due to lower utility bills). At the same time, July was the 16th consecutive month during which inflation proved to be above the Bank of Japan's 2% target.
- Current BoJ Governor Ueda believes the bank should maintain current policy as long as it remains uncertain about the sustainability of the pro-inflationary trend fueled by higher wages and persistently high demand in the economy.
USDJPY exchange rate, H1 interval. Source: xStation5
