USD/JPY sees an establishment above 130.00 as higher US CPI bolsters jumbo Fed rate hike

• USD/JPY looks to overstep 130.00 on higher-than-expected US inflation.
• The US inflation print at 8.3% indicates that the Fed needs to struggle more going forward.
• The core CPI has also increased to 6.3% against the forecasts of 6%.

The USD/JPY pair is struggling a little around 130.00 but is likely to accelerate further as the higher-than-expected US Consumer Price Index (CPI) has bolstered the odds of a mega rate hike by the Federal Reserve (Fed) in June.

As per the market consensus, the US CPI was seen at 8.1%, lower than the former figure of 8.5%. While the print of 8.3%, higher than the forecasts has cleared that the Fed has a long way to go and an aggressive hawkish tone will remain on the cards. One thing can be concluded that the inflation is near its peak levels and now the market participants could expect a diminishing rate journey led by higher rates and a quicker balance sheet reduction process.

Meanwhile, the core CPI that excludes food and energy prices has landed at 6.2% higher than the estimates of 6%, which clears that higher energy bills and food prices are not the only expenses that are impacting the real income of the households. The US dollar index (DXY) is attempting to sustain above 104.00 as higher-than-expected CPI has worsened the situation for Fed policymakers.

On the Tokyo front, yen bulls are displaying some strength after a prolonged weak period. The situation of value bet is supporting the yen bulls against the greenback.  Although the situation won’t persist longer as the Bank of Japan (BOJ) will continue to stick with its ultra-loose monetary policy, which will dampen the demand for yen sooner rather than later.