EURUSD rallys as tightening continues
As the CPI remained stubborn, traders began to consider the possibility of a larger rate hike by the ECB. In March, consumer inflation in the Eurozone decreased due to falling gas and oil prices. However, the core rate, which excludes volatile items such energy and foods has remained persistently high. The issue of services inflation is complex, as tightening labour markets exacerbate wage pressures. This would allow policymakers to justify their need to continue raising interest rates, on top of 350 basis points raised since last summer. A good GDP reading will cushion the impact of high borrowing costs, and help the euro to strengthen. 1.1250 You can also find out more about 1.0800 as support.
USDJPY rises on BoJ’s dovish BoJ
The Japanese yen is weakening as it is expected that the Bank of Japan will maintain its dovish position. Kazuo ueda insists that the policy will remain the same since he assumed the leadership, despite market pressure. Central bank officials are concerned that CPI could fall below 2% by the middle of the year, after the CPI spiked to a high of 4.2% for the first time in 41 years in January. BoJ is aiming to avoid a chronic deflationary crisis in Japan, so it will not ease monetary policy.