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JPY fell to a 4-week low ahead of US inflation data

Thursday, May 30, 2024

Today’s headlines

What’s happening: The USD/JPY forex pair breached the 157 mark on Wednesday.

What happened: The Japanese yen fell to a four-week low versus the greenback, facing pressure from rising US Treasury yields.

The US dollar index recorded gains ahead of key inflation data, while investors assessed the Bank of Japan’s next moves.

Why it matters: Bank of Japan board member Seiji Adachi said that the central bank could hike interest rates if a sharp decline in the Japanese yen accelerated inflation levels in the country. The BoJ had raised interest rates for the first time since 2007 in March this year.

On the economic data front, Japan’s consumer confidence index fell to a reading of 36.2 in May, from 38.3 in the prior month. The figure was also below market estimates of 38.9 and represented the lowest reading since November last year.

Data released last week showed Japan’s core inflation rate easing to 2.2% in April, from 2.6% in the prior month, amid milder food inflation. The headline rate slowed to 2.5% in April, from March’s 2.7% level, falling for the second month in a row.

Softer consumer price inflation from the US weighed on the greenback, while boosting US Treasury yields. The benchmark 10-year yields hit their strongest level in around four weeks on Wednesday.

Recent data also showed a surprise increase in US consumer confidence, lending support to the greenback.

Strength in the US dollar exerted pressure on the JPY/USD pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, closed almost flat at 104.61 on Wednesday, after recording sharp gains earlier during the session.

The USD/JPY forex pair rose around 0.3% to 157.65 on Wednesday. Japan’s Nikkei 225 fell 0.77% to close at 38,556.87.

The US dollar recorded gains against other major peers, with the EUR/USD down around 0.5% to 1.0803 and the GBP/USD declining around 0.5% to 1.2701 on Wednesday.

What to watch: Investors await the release of US core personal consumption expenditures price index, the Fed’s preferred gauge to measure inflation, due this Friday. The US core PCE price index, which increased by 2.8% from the prior year in March, is expected to rise gain by 2.8% in April. The personal consumption expenditure price index in the US is projected to increase by 0.3% month-over-month in April, the same pace as in the earlier month.

Data on unemployment rate, retail sales and industrial production from Japan, scheduled for release on Friday, will also remain in focus.

The markets today

Salesforce will be in focus today after releasing results for its first quarter

Context: Salesforce’s shares fell sharply in after-hours trading on Wednesday, following the company’s weaker-than-expected quarterly sales and weak guidance.

Details: Salesforce’s top-line came in lower than expected, representing the first miss on this parameter in over a decade. The enterprise cloud solutions company also issued a downbeat second-quarter forecast amid weak spending by clients on its cloud and enterprise business products due to elevated inflation and prospects of interest rates remaining higher for longer.

Salesforce’s quarterly revenues grew 11% year-over-year to $9.13 billion, missing consensus estimates of $9.147 billion. Its adjusted earnings jumped 44% to $2.44 per share, topping Wall Street expectations of $2.38 per share.

The company reported operating margins of 18.7% and non-GAAP operating margins of 32.1% for the quarter. Salesforce closed the quarter with PROs (remaining performance obligations) of $26.4 billion, representing a 10% year-over-year surge.

“We are at the beginning of a massive opportunity for our customers to connect with their customers in a whole new way with AI. As the world’s #1 AI CRM, we’re incredibly well positioned to help companies realize the promise of AI over the next decade,” CEO Marc Benioff said.

Management guided to second-quarter revenues of $9.20 billion to $9.25 billion, which came in below market estimates of $9.34 billion. The company projected quarterly adjusted earnings of $2.34 to $2.36 per share, falling short of market expectations of $2.40 per share.

Salesforce guided to full-year revenue of $37.7 billion to $38 billion, broadly in-line with market views. The company also projected full-year adjusted earnings of $9.86 to $9.94 per share, higher than consensus estimates of $9.76 per share.

How shares responded: Salesforce’s shares tanked 16% to $228.10 in extended trading on Wednesday, following the release of quarterly results. The stock has added around 8% over the past six months.

What to watch: Investors will continue monitoring inflation levels and prospects of the central bank to cut interest rates, both of which could significantly impact client spending ahead.

Other Markets: European indices closed lower on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.86%, 1.10%, 1.52% and 1.08%, respectively.

The news shaping the markets

France and Germany said that Ukraine should be permitted to use their weapons to target bases inside Russia. The news sent the safe-haven US dollar index higher in forex trading this morning.


The Philippines reported a 0.8% year-over-year decline in producer prices in April, versus a 1.1% easing a month ago. This signalled producer deflation for the fourth straight period, exerting pressure on the PHP/USD forex pair.


UK’s car production plunged 7% year-over-year to 61,820 units in April. This being the second month of decline in a row sent the GBP/USD pair lower in forex trading this morning.


Germany’s annual inflation rate rose to 2.4% in May, from a three-year low of 2.2% in each of the prior two months, lending support to the EUR/USD forex pair.


The American Petroleum Institute said US crude oil inventories declined by 6.49 million barrels in the week ending May 24, compared to a rise of 2.48 million barrels in the prior week, which sent WTI crude oil prices higher this morning.

What else to watch today

South Africa’s money supply M3, private sector credit, government budget value, producer price inflation and South African Reserve Bank interest rate decision, Spain’s inflation rate and industry confidence indicator, Turkey’s balance of trade, economic confidence index, gross foreign exchange reserves and MPC meeting summary, Italy’s unemployment rate and producer price inflation, Eurozone’s economic sentiment indicator, unemployment rate, consumer confidence, consumer inflation expectations gauge, industry confidence indicator, selling price expectations and services confidence indicator, Mexico’s unemployment rate, Canada’s current account, average weekly earnings and CFIB’s business barometer, US corporate profits, GDP growth rate, goods trade balance, initial jobless claims, wholesale inventories, continuing jobless claims, price index for personal consumption expenditures, pending home sales, natural gas stocks change, crude oil inventories, gasoline stocks change and distillate inventories, as well as Argentina’s consumer confidence indicator.


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