USD/JPY finds a short-lived pullback from 125.40 ahead of the US Retail Sales

• USD/JPY has sensed a minor pullback after a decent correction from a six-year high at 126.32.
• The DXY ended its nine-day losing streak on higher than expected US PPI.
• BOJ’s Kuroda indicated fears of falling household income and corporate profits due to high energy bills.

The USD/JPY pair is experiencing a short-lived pullback after a steep fall from a six-year high at 126.32. The pair is likely to witness more downside as the mighty greenback loses strength. The US dollar index (DXY) has tumbled below the critical figure of 100.00 as the impact of higher inflation faded away.

On Wednesday, the DXY ended its nine-day winning streak after the US Bureau of Labor Statistics reported the yearly Producer Price Index (PPI) at 11.2%. The yearly US PPI has been significantly higher than the estimates of 10.6% and prior print of 10.3%. Also, the history dictates that the 52-week US PPI at 11.2% is the highest ever print since November 2010, which has raised the market expectations of a jumbo interest rate hike from the Federal Reserve (Fed) in May.

Earlier, the DXY was receiving bids on a higher US Consumer Price Index (CPI) at 8.5% as investors were expecting that the Fed has to shift the interest rates higher to tame the soaring inflation. A decent slippage in the DXY has underpinned the Japanese yen against the greenback.

Meanwhile, the speech from the Bank of Japan (BOJ)’s Governor Haruhiko Kuroda has emphasized the rising inflation and falling real income of households. The BOJ’s Kuroda dictated that the impact of the Covid-19 and the Ukraine crisis is hurting the economy. Higher energy and commodity prices are weighing on Japan’s economy by reducing households income and corporate profits.

Going forward, investors will focus on the US Retail Sales, which will release on Thursday. A preliminary estimate of the US Retail Sales claims a higher print at 0.6% against the prior figure of 0.3%.