• US dollar gets back its losses from Thursday
  • Inflationary pressures from Japan uninterruptedly subdued
  • NZD is the weakest currency in G10 in early trading

The US dollar could have had a one-off stop within its upward trend this week. The greenback has been decisively the most powerful currency in the G10 basket so far, a move has been underpinned by a surge seen in the US10Y yield. Nonetheless, US yields stopped increasing yesterday morning and it was a tipping point for the USD at least in the very short term time frame. Let’s pin down that the US10Y yield has moderated to 2.3% after marking a local peak close to 2.36%. However, the US dollar might be already out of the woods (notice we still consider the short-term) as it’s up against all its major peers in early trading.

As far as the Asian session is concerned, we got an avalanche data from the Japanese economy which was in line with expectations more or less. Let’s present the key readings (all for August):

  • National CPI 0.6% yoy vs. 0.6% yoy expected
  • National CPI ex fresh food 0.7% yoy vs. 0.7% yoy
  • National CPI ex fresh food and energy 0.2% y/y vs. 0.2% yoy

As you can see above all inflation releases proved to be consistent with forecasts, however there is still little mounting pressure to come. Moreover, the so-called super-core CPI from Tokyo came in at 0% yoy missing the consensus at 0.1% yoy. Keep in mind that prints from the capital of Japan are published a month earlier, so they could constitute a prognosis ahead of national releases. In addition, it’s worth mentioning that Japanese retail sales slid 1.7% mom in August while a 0.5% mom drop was anticipated.

link do file download linkJapanese wage growth remains lackluster and a flat trend in retail sales does not bode well going forward. Source: Macrobond, XTB Research

By and large, the Japanese economy seems to be still a long way off from a marked improvement in terms of inflation. Thus, the USDJPY should be still mostly driven by the US data and the US 10Y yield which seems to be among key drivers for the pair.

On top of that, the New Zealand dollar is on the back foot in the morning losing the most against the USD. There were no macroeconomic releases during the Asian session except for the annual RBNZ report. The central bank stressed that the New Zealand’s economy and financial system remain on a sound footing despite continuing challenges in the global environment – nothing to jolt the FX market to say the least.

link do file download linkMeanwhile, the USDJPY seems to be gaining momentum in early trading being propped up by rebounding yields in the US. Bulls could aim at 114.3 as their next target. Source: xStation5