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US yields edge a little higher- USD/JPY rebounds towards 154.50

The first question to ask here this morning, now that the dust has well and truly settled on the US CPI report yesterday is; was it really that soft? Well, in truth no it was not. We have to remember the core rate did not actually fall by much on an annualised basis, matching expectations for a 3.6% rise. Granted it was the lowest for several months, but it is just one months data at the end of the day. That said, the markets took the opportunity to latch onto that and as noted; it was as much about relief the data was not higher than perhaps anything else. So, stocks roared and the dollar fell with US yields. So, was this all an over-reaction to the data? As already stated, perhaps it was, but that does not detract from the price action and at this stage, that is all we have to go on. What is clear; is that the stock markets in particular were looking for any excuse to accentuate the positive. Hence, money flowed back to bonds too and that undermined the USD/JPY. However, those yields appear to be stabilising this morning and that has helped to push the USD/JPY back towards 154.50 a short while ago. However, it remains to be seen if it can climb back much higher ahead of more US data due later today. The USD/JPY is currently trading at 154.35

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