The US dollar was among the weakest G8 currencies on Thursday (6/12). Risk-off sentiment fueled by US President Trump's fresh tariff threats, coupled with higher expectations of a Fed rate cut, pushed the USD lower against the safe-haven Japanese yen.

US CPI figures released on Wednesday revealed that inflation grew at a 0.1% pace in May and 2.4% year-on-year, below the 0.2% and 2.5% increases expected by market analysts, respectively.

The figures have eased concerns about the inflationary impact of Trump's "Liberation Day" tariffs and raised expectations that the Fed will cut rates again in September. The CME Fed Watch tool shows a nearly 60% chance of a 25 bps rate cut after the summer, up from 50% last week.

Trump tariff threats have rattled markets

Earlier today, US President Trump announced that he would send a letter to all trading partners setting out a series of demands they must accept if they want to avoid higher tariffs starting July 9. The threat increased risk aversion and gave the yen a fresh boost.

In Japan, Prime Minister Ishiba noted significant differences in how to reach a trade deal with the US and reiterated that he was not pursuing a specific timetable for reaching an agreement.

A short time later, Japan's Chief Trade Negotiator, Ryosei Akazawa, said that he was not aware of any discussions on US Treasury bonds and that any negotiations on the topic would be led by Finance Minister Kato.(alg)

Source: FXstreet