This Week: Yen bulls may have more room to run

JPY has been the best-performing G10 currency against the US dollar of late!

That's true not just for today alone (+0.25% at the time of writing on Monday, March 11th), but also so far in March (+2.25% month-to-date).

USDJPY has broken down this week after consolidation above 150 in the last two weeks of February.

Intervention fears by the Japanese authorities were high as the major neared the October 2022 level at 151.94.

But USD/JPY has moved lower in the last few days on falling US Treasury yields and expectations that the Bank of Japan might hike rates soon.

Events Watchlist:

• Tuesday, March 12th: US CPI

The key inflation report will direct all markets due to its sensitivity to interest rates. The FOMC is data dependent and Chair Powell recently reiterated that the Fed needs to be patient, but rate cuts are on the horizon.

There’s a 70% chance of a first reduction in June.

A stronger monthly 0.4% print could cut those bets and support USD.

• Friday, March 15th: Japan Wage Negotiation data

 “Shunto” (annual wage negotiations) results could raise speculation that the BoJ will hike rates, with reports suggesting that wages could increase by 4%.

Markets are already pricing in around a 64% chance of a 10bp rate hike in March.

The yen’s recent strength and USD/JPY fall depends on this data, after hawkish comments from BoJ officials.

Here’s a comprehensive list of other key economic data and events due this week:

Monday, 11th March

• JPY: Japan GDP
   
• US budget proposal from President Joe Biden

Tuesday, 12th March

• AUD: Australia business confidence
   
• EUR: Germany CPI
   
• JPY: Japan PPI
   
• GBP: UK jobless claims, unemployment
   
• USD: US February CPI report

Wednesday, 13th March

• EUR: Eurozone industrial production
   
• NZD: New Zealand food prices
   
• GBP: UK industrial production
   
• GER40: Volkswagen, Adidas earnings

Thursday, 14th March

• USD: US PPI, retail sales, initial jobless claims

Friday, 15th March

• NZD: New Zealand PMI
   
• JPY: Japan’s largest union announce results of wage talks
   
• USD: US industrial production, University of Michigan consumer sentiment