Hilsenrath suggested the Fed may lower its 6.5% threshold for unemployment and also possibly change its inflation target. Meanwhile, unemployment claims were mildly higher than expected and core durable goods orders also disappointed. This resulted in a disappointing session for the USD and in turn supported risk assets.
EUR/USD also popped higher with a relatively in-line German Ifo business climate reading and better-than-expected Spanish unemployment rate. The pair came within striking distance of 1.33 and remains fairly elevated with some analysts feeling the eurozone is on the right path to recovery after its PMIs also showed some positive signs. There is nothing to look out for out of Europe today and it should be a relatively quiet end of week for the single currency.
GBP/USD spiked to 1.543 in US trade as it experienced a strong recovery after having been smashed lower on the GDP data. USD/JPY dropped below 100 as the USD lost ground and is currently trading at around 99.20. The pair is in focus in Asia today following Japan’s CPI data. CPI showed a 0.4% year-on-year rise which was better than a consensus of 0.2%. This is the highest level of inflation seen in the Japanese economy for a number of years and highlight that we are seeing a good recovery in the country. USD/JPY hasn’t had much of a reaction to the data and remains relatively sidelined at 99.24. Investors generally struggle to interpret Japanese data as solid readings generally support the currency, but in this case a stronger yen is a negative.
Overall this proves that Abenomics is working but then implies the BoJ won’t need to increase the current rate of stimulus which is a bit of a dampener to a stimulus driven market. Later today has consumer sentiment and inflation expectations due out of the US.