Hawkish Fespeak Weighs On Yen, Japan's October CPI Due Shortly

U.S. Tsy sell-off pushed USD/JPY higher Thursday, with the market reacting to hawkish Fed rhetoric, which cast doubt on narratives doing the rounds after the release of below-forecast U.S. CPI data last week.

• St. Louis Fed Pres Bullard said rates will need to rise to at least 5.00% to 5.25% as a minimum to contain inflation. Minneapolis Fed's Kashkari later noted that the terminal level of interest rates remains an "open question."
• U.S./Japan yield spreads widened on Fed musings. 2-year yield gap rose 9.9bp; 10-year differential expanded 7.8bp, returning above 350bp.
• Global equity markets remained in the red, while the VIX index fell 0.75%. The Nikkei 225 futures are marginally lower.
• USD/JPY overnight risk reversal climbs for the fourth consecutive day, reaching its best levels since Nov 8 this morning.
• Spot USD/JPY trades at Y140.24, little changed on the day. Initial resistance is at Y140.97, the 100-DMA. However, short-term technical conditions remain bearish, with the recent pause in the downtrend looking like a bear flag pattern, with a clean breach of the 61.8% retracement of the Aug 2 - Oct 21 upleg at Y138.64 eyed.
• Japan's national CPI will be published at the bottom of the hour. Core inflation may have accelerated to +3.5% Y/Y in October from +3.0% recorded in September, moving further away from the BoJ's +2.0% target, but this is unlikely to change the central bank's assessment that price gains remain driven by cost-push factors.