USD/JPY Eyes US CPI as Bond Yields Rise Amid US-Iran Tensions

The bond market is quietly making significant moves ahead of today's highly anticipated US CPI report, with rising yields adding upward pressure on USD/JPY while broader markets take a breather following yesterday's risk selloff. Escalating US-Iran tensions in the Middle East triggered the prior session's flight to safety, boosting the Japanese yen and Swiss franc against risk-sensitive counterparts. Bond yields are climbing despite the geopolitical uncertainty, suggesting traders are positioning for a potentially hot inflation print that could delay Federal Reserve rate cuts. EUR/USD and GBP/USD are trading in tight ranges as European session activity remains muted ahead of the data release. The CPI figure will be pivotal for near-term USD direction — a higher-than-expected reading would likely strengthen the dollar broadly, pushing USD/JPY higher and EUR/USD lower. Conversely, a softer print could accelerate dollar selling. Traders should also monitor crude oil prices, as Middle East developments could impact inflation expectations and energy-linked currencies like CAD.