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Further JPY Weakness Keeps USD/JPY Within Range of Multi-Decade Highs

FOREX
  • UK CPI came in to the soft side of expectations, however close enough to the Bank of England and sell-side view to mean little for current rates pricing. An August hike is fully priced, however the June meeting remains live, with 15bps of rate cuts currently priced in. GBP/USD saw brief weakness on the data release before the move reversed, however renewed USD buying as the pair within range of yesterday's lows 1.2668 ahead of the crossover.
  • JPY is the weakest performing currency for a second session, with USD/JPY again keeping pressure on the cycle high and November 2023 best at 151.91. This level marks the bull trigger and strength through here puts the pair at multi-decade highs. An erratic move lower could raise market concern over Japanese intervention - however the authorities have, so far, remained quiet on FX moves.
  • USD is the firmest performer in G10 so far, with JPY and SEK among the weakest.
  • The Fed rate decision understandably takes focus going forward, and while markets expect little in terms of policy changes, the fresh dot plot and Summary of Economic Projections release will be carefully eyed. ECB speak remains thick and fast, with appearances from ECB's Lane, de Cos, Schnabel, Nagel and Villeroy all scheduled.
  • Comments will follow on from Lagarde's appearance at the ECB Watchers conference - at which she coalesced around the recent central bank theme of waiting for more data by June for making a key rate decision.
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