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USD/JPY at Session Highs, Despite Little Participation Via Futures

JPY
  • USD/JPY inches to the best levels of the day headed into the London close - thereby erasing a large part of the pullback in the pair in NY hours Tuesday. Despite the pick-up in activity across spot prices, pre-FOMC minutes muted markets are keeping a lid on volumes here: JPY futures volumes are just over 20% below average for this time of day.
  • The edge lower in JPY also well reflected in EUR/JPY, which extends the February uptrend to trade (again) the best levels since November. We wrote earlier today that markets are pricing in a considerably higher chance of further EUR/JPY gains relative to the beginning of the year, and now price a near 20% chance that EUR/JPY will have cleared 164.30 - the cycle high from November last year - after the March BoJ decision - an implied pricing that's more than tripled since the beginning of the year - and grows to near 1/4 when capturing the April meeting.
  • This shifts focus to the first of several tallies for Rengo pay deals due in mid-March - which should provide the latest firm indication for wages ahead. Consensus looks for pay growth of near 4% this year - the highest since 1992.
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