The USD/JPY pair climbs to 156.50 during Tuesday’s European session as investors remain cautious ahead of crucial data releases. The market awaits the United States Consumer Price Index (CPI) data for April and Japan’s preliminary Q1 Gross Domestic Product (GDP) figures. The outcome of the US inflation data will influence market expectations regarding potential Federal Reserve (Fed) rate cuts, currently anticipated to commence from the September meeting.

Analysts forecast a slight softening in the annual headline CPI to 3.4% from March’s 3.5%. Core inflation, excluding food and energy prices, is expected to decelerate to 3.6% from the previous 3.8%. The monthly headline and core CPI are also projected to show slower growth rates compared to the prior period.

Ahead of the CPI data, investors will pay attention to the US Producer Price Index (PPI) data for April, indicating changes in goods and services prices at their production stages.

Meanwhile, concerns about the Bank of Japan’s (BoJ) policy-tightening scope keep the Japanese Yen under pressure. The focus shifts to Japan’s Q1 GDP data release on Thursday, with expectations of a 0.4% contraction quarter-on-quarter and a significant 1.5% contraction on an annualized basis. Weak GDP figures could impact the BoJ’s policy decisions.

Trade Idea: 

Traders can monitor USD/JPY for potential volatility following the release of US CPI and Japan’s Q1 GDP data. Consider market sentiment and technical levels for trading opportunities amidst data-driven movements in the pair.