The Japanese Yen (JPY) firmed against the US Dollar (USD) on Friday, with USD/JPY easing after a sharp two-day rally that had lifted the pair to its highest since August 1. At the time of writing, USD/JPY trades near 149.50 as the Greenback’s recent surge loses traction. The US Dollar Index (DXY) retreated from three-week highs to around 98.18, with traders reassessing the Federal Reserve’s (Fed) policy outlook following fresh inflation data and tariff headlines.
US PCE inflation steady, consumer sentiment dips
The August core Personal Consumption Expenditures (PCE) Price Index rose 0.2% MoM, unchanged from July’s revised figure, while the annual rate held at 2.9%. Headline PCE climbed 0.3% MoM and 2.7% YoY, signaling that price pressures remain persistent despite stable core inflation.
The University of Michigan’s September survey showed sentiment slipping to 55.1 from 55.4, with inflation expectations easing. The one-year outlook edged down to 4.7% from 4.8%, while the five-year view softened to 3.7% from 3.9%.
Japan CPI softer than expected
In Japan, Tokyo’s September Consumer Price Index (CPI) rose 2.5% YoY, matching August’s revised pace but below expectations. Core CPI excluding fresh food also printed at 2.5% YoY, undershooting the 2.8% forecast, while the measure excluding food and energy slowed to 2.5% YoY from 3.0%. The data reinforced expectations that inflation momentum is cooling, complicating the Bank of Japan’s policy stance.
Tariffs weigh on Greenback sentiment
Beyond the data, trade-policy concerns returned to center stage after US President Donald Trump announced fresh tariffs effective October 1. The measures include 100% tariffs on branded pharmaceutical products made abroad, 50% on kitchen cabinets and bathroom vanities, 30% on upholstered furniture, and 25% on heavy trucks. The renewed trade frictions dented risk appetite and limited demand for the Greenback, even as US inflation data broadly matched forecasts.
