Read on the Trading Floor - 26 April 2024
Today’s focus… BoJ/MOF show no interest in JPY weakness, PCE disappoints and much more
Macro Themes At Play
Theme 1 - You can pass #USDJPY
Theme 2 - DXY longs disappointed by PCE
Theme 3 - Week ahead previews
Further reading and listening of note
Theme 1 - You can pass #USDJPY
A lot of ink has been spilt on a potential MoF intervention zone 155-156, but as we aim for 157.00/158.00 the market is left with nothing else to do but prod and probe and test their resolve. Are we now waiting for 160?
The gap lower in Tokyo CPI on the back of a repricing of school fees (but when subtracted CPI is still slowing faster than expected), BoJ revising lower their core inflation projections to around 2%, "bond purchases to remain consistent", the yield story in the US and steeper curves globally are all supporting cross-JPY higher. As we approach Japanese Golden Week holiday it feels like JPY will be dominated by US yields more so than local authorities. The threat remains, the risks of being long USD is not free but the key determinant is US 10year yields drifting to >5% more so than MOF supplying USD at this stage or the BoJ hiking rates aggressively. It's July or even Oct before the mkt expects something from the BoJ.