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JPY Extends Downleg on Hawkish Fed

FOREX
  • The JPY is comfortably the poorest performer in G10 again Tuesday, with the USD/JPY uptrend accelerating on the break of the top of the bull channel, drawn from the Jun 1 2021 high. More importantly though, the USD has also cleared the psychological 120.00 handle. This confirms a resumption of the uptrend and strengthens bullish conditions for the pair.
  • The move, initially triggered by Powell's particularly hawkish appearance at the NABE yesterday, looks to have legs, with options markets continuing to price out the likelihood of a meaningful move lower in USD/JPY that had been baked in during the early weeks of the Ukraine crisis. Reflecting this, USD/JPY risk reversals have risen for 11 of the past 12 sessions.
  • European equities are picking up this morning, shrugging off the negative Wall Street close, and helping boost growth proxy currencies. AUD, NZD and SEK are among the stronger performers, while a pullback in the oil price works against NOK and CAD.
  • Data releases take a backseat Tuesday, with little on the docket to divert attention away from the stacked central bank speaker schedule. There are four ECB speeches to digest, with the highlight being Lagarde at 1315GMT / 0915ET as well as Fed's Williams, Daly and Mester. BoE's Cunliffe also crosses.
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