Yen falls on BoJ inaction, focus on US PCE inflation

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The Japanese Yen remains under bearish pressure and was trading on Friday at its weakest level in over three decades against the US Dollar following the Bank of Japan’s decision to leave the monetary policy settings unchanged.

Later in the day, the US Bureau of Economic Analysis will release the Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve’s preferred gauge of inflation, for March.

Analysts expect US core PCE inflation to signal firm price pressures as markets delay Fed rate cut bets.

The BoJ announced early Friday that board members decided to maintain the key interest rate target range steady at 0%-0.1%. It removed from its policy statement the reference to currently buying about 6 trillion JPY worth of Japanese Government Bonds per month and reiterated that they will adjust the degree of monetary easing if trend inflation were to rise further.

In the post-meeting press conference, BoJ Governor Kazuo Ueda said the change of a prolonged JPY weakness was “not zero” and added that the impact of exchange rates on the economy include positive ones.

USDJPY was trading above 156.50, at a near multi-decade low since May 1990, rising more than 0.7% on the day.

The USD Index (DXY) closed in negative territory on Thursday after the data showed that the US economy expanded at a softer pace than expected in the first quarter.

The details of the gross domestic product report, however, showed a significant increase in the GDP price deflator and helped the DXY limit its losses.

Early Friday, the DXY was fluctuating in a tight channel above 105.50 and the 10-year US Treasury bond yield remained near 4.7% after rising more than 1% on Thursday.

Meanwhile, US stock index futures saw strong gains in the European morning, reflecting an improvement in risk mood.

The EURUSD continued to push higher in the American session on Thursday and registered its highest daily close in over two weeks. The pair is in a consolidation phase below 1.0750 in the European session.

GBPUSD extended its weekly rebound into a third consecutive day on Thursday and gained 0.4% on the day. The pair started the last trading day of the week by holding steady at around 1.2500.

Gold edged higher on Thursday, but struggled to gather bullish momentum as US yields stretched higher.

XAUUSD keeps its footing early Friday and is trading in the green above $2,340.

(Source: OANDA)