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Rabobank flags USD/JPY risks around upcoming US CPI

Rabobank expects the Fed to hold rates steady this year, with a softer July CPI seen potentially weakening the USD and reducing the odds of another move above USD/JPY160.

Reported · Written up by our desk · Major Pairs

Rabobank, via FXStreet, is warning that upcoming US July CPI data could shift USD/JPY momentum, with softer inflation potentially weighing on the US Dollar ahead of a key level in the pair.

In its central scenario, Rabobank expects the Federal Reserve to hold rates steady this year and sees that view being supportive of a softer USD, which could in turn reduce the likelihood of another attempt to break above USD/JPY160.

Rabobank also links intervention risk to the CPI outcome, saying it may be too soon to expect the Japanese Ministry of Finance to intervene again, but that a softer USD combined with fears of intervention would likely lower the odds of a further move over USD/JPY160.

Conversely, Rabobank notes that stronger than expected CPI inflation and a rebound in the Dollar would be unwelcome for Japanese authorities, as it could revive carry trade dynamics and raise the risk of another attempt at USD/JPY160.

Latest closeUSD/JPY 159.27 ▲0.5%

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