Geopolitical risks and upcoming US CPI data drive demand for the USD, pressuring the JPY ahead of key inflation figures.
The USD/JPY pair climbed to near 157.55 in early European trading on Tuesday, supported by heightened geopolitical tensions in the Middle East. Reports of potential US military escalation in Iran bolstered the US Dollar, as traders awaited April’s US Consumer Price Index data for further direction.
Analysts expect headline CPI inflation to accelerate to 3.7% in April from 3.3% in March, while core CPI is forecast to rise to 2.7% from 2.6%. Surging energy costs linked to the Middle East conflict are seen as a key driver. A stronger-than-expected report could delay Federal Reserve rate cuts, reinforcing USD strength.
Despite the upward momentum, gains may be capped by intervention concerns. Japan’s Finance Minister reaffirmed close cooperation with the US on currency movements, signaling potential pushback against excessive JPY weakness.