Meanwhile, Bloomberg journalist Matthew Boesler encountered difficulties obtaining information as inquiries were redirected among government departments, raising questions about the reliability of everything the BLS is doing.

The Federal Reserve has consistently emphasized its reliance on data to inform decisions regarding monetary policy. So, if the data is unreliable, where does that leave most who are not ” super users”?

Lathered In Relief

From a cross-asset perspective, the component in the PCE data still underscores the challenges the Fed may encounter in navigating monetary policy amid evolving inflationary conditions. Excluding energy and housing, services inflation surged by 0.6% last month compared to December. This type of inflation, often called “sticky” inflation, represents a significant challenge for the Fed and overall price dynamics. The 0.6% increase marks the most robust growth in services inflation since March of 2022, a notable period coinciding with the Federal Reserve’s interest rate liftoff.

Although the in-line core inflation readings might lather a bit of relief, especially as the event risk is now behind us, which can sometimes serve as a bullish catalyst on its own, it’s essential to acknowledge that the warmer, bordering on hot inflation data underscores the prevailing belief that navigating the final stretch of managing inflation will likely be a challenging and uneasy journey for all. However, we join the prevailing belief that the direction of travel is lower.

Forex Markets

149.20 Given How Are You Left?

If you are a dollar-yen trader like us, you should expect some volatile times leading up to the next Bank of Japan meeting as traders jump on and off the BoJ policy hamster wheel. As we suggested yesterday, if not for the constant and overly noisy PCE coverage, USDJPY would have traded closer to 149 ( 149.20 was the low post-PCE).

Still, given the noisy end-of-month rebalancing, especially with fully hedged funds needing to adjust Yen hedges after spectacular gains on Tokyo stocks this month, I would not read too much into mid-day New York price action that coincides with WMR London Fix, where month-end rebalance noise tends to crescendo

A drop below 140 USD JPY (135 is our H2 target) will also require support from the Fed to initiate rate cuts, narrowing the policy divergence with the Bank of Japan (BoJ). But currently, the recent series of robust US economic activity and inflation data at the beginning of this year challenges any bearish US dollar outlook.