Japan’s Q1 GDP growth exceeded expectations, rising 2.1% year-on-year, but the GDP deflator at 3.4% has raised inflation concerns. This has led markets to price in an 80% chance of a rate hike by the Bank of Japan in June. Despite these developments, the yen remains under pressure, with the USD/JPY pair crossing the 159 mark again today, indicating ongoing volatility in currency markets.

In the UK, mixed labor market data showed a rise in the unemployment rate to 5% and a significant drop in payrolled employees, the largest since the pandemic. However, wage growth outpaced expectations at 4.1%, prompting caution from the Bank of England. As a result, market expectations for interest rate hikes have diminished, with a potential hold in June and a possible hike in July.

The key takeaway for market professionals is to monitor central bank responses closely, as inflationary pressures in Japan and mixed signals from the UK labor market could influence monetary policy and market sentiment in the coming weeks.

Source: xtb.com