With a quiet week ahead in terms of economic data, our attention turns to the USDJPY, where recent events could see potential upside in the pair.
Over the past couple of weeks, the USDJPY didn’t take the bait and follow US10Y lower with the same momentum. At the start of last week, we thought that should keep USDJPY downside more contained in the event of a further push lower in yields.
That was the wrong assumption, as we saw USDJPY flushing lower as both the USD and US10Y lost ground after a disappointing ISM Mfg PMI – and an even more discouraging ADP.
However, an interesting turn of events created a perfect storm for the USDJPY after a solid beat in the ISM Services PMI – and Vice Fed Chair Clarida’s change of heart regarding interest rates and inflation.
We explore these themes in detail in this week’s video.