- The slightly higher-than-expected rates of inflation in Japan revived bets for an imminent shift in the Bank of Japan's policy stance and offers some support to the Japanese Yen.
- Japan's Statistics Bureau reported on Tuesday that the headline CPI rose by 0.1% MoM in January, though decelerated from the 2.6% YoY rate to 2.2% during the reported month.
- Additional details of the report showed that the Core CPI, which excludes volatile fresh food items, climbed 2% YoY in January as compared to estimates for a 1.8% annual gain.
- Furthermore, an underlying CPI reading that excludes both fresh food and energy slowed from the 3.7% YoY rate in December to 3.5%, or an 11-month low in January.
- Meanwhile, the slowdown in inflation comes on top of an unexpected recession in Japan during the fourth quarter and allows the BoJ to stick to its ultra-loose policy.
- The US Dollar languishes near its lowest level since February 2 touched amid a softer tone surrounding the US Treasury bond yields and weighs on the USD/JPY pair.
- The markets recently pushed back expectations for the first rate cut by the Federal Reserve to June from May in the wake of sticky inflation and a resilient US economy.
- Kansas City Fed President Jeffrey Schmid said that the US central bank should be patient and wait for convincing evidence that the inflation fight has been won.
- Traders, however, seem reluctant to place aggressive bets and prefer to wait for more cues about the likely timing and the pace of interest rate cuts by the US central bank.
- The market focus remains glued to the release of the US Personal Consumption Expenditures (PCE) Price Index on Thursday, which could provide a fresh impetus to the USD.
- Traders on Tuesday will confront the release of US Durable Goods Orders, the Conference Board's US Consumer Confidence Index and the Richmond Manufacturing Index.
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