- USD now gaining across the major FX board
- Beijing reports another new locally-transmitted COVID-19 case
- USD/JPY higher following the Bank of Japan statement, forecasts
- BOJ leaves main monetary policy tools unchanged (es expected)
- China state planner says their economy faces not small challenges this year
- Goldman Sachs Brent crude oil forecasts for 2022 and 2023: US$96 and US$105
- Nearly 50 people have left the Russian embassy in Ukraine and returned to Moscow
- Rising US yields and the USD conundrum
- Oil rises further in Asia morning trade - Brent to highest since 2014
- Nomura expect China to cut its LPR rate again on Thursday (20 January)
- PBOC sets USD/ CNY reference rate for today at 6.3521 (vs. estimate at 6.3522)
- More on Tokyo to enter a 'quasi' state of emergency
- Preview of the BOJ monetary policy meeting - likely to be a non-event for the yen
- US 10 year Treasury yield hits a two year high
- Recap of weak Australian consumer confidence - "Australian consumers shellshocked"
- China financial media - analysts expect prime rate cut Thursday
- Australia weekly consumer confidence 97.9 (prior 106.0)
- NZ capacity constraints & cost pressures a huge issue - "even higher OCR track" ahead
- Japan media says a 3 week 'quasi' emergency is being consider for Tokyo and other areas
- Trade ideas thread - Tuesday 18 January 2022
- BoC losing control of inflation, wage and house price expectations - should hike next week
- New Zealand QSBO for Q4 2021, business confidence headline -28% (prior -11%)
There was no change to monetary policy from the Bank of Japan today at the conclusion of their meeting. No change was expected. The Bank did revise its forecasts for CPI (and GDP) higher for fiscal year ’22 (and also for GDP in ‘22) and also for CPI higher for FY’23 (but not GDP). The higher forecasts were also expected after having been canvassed extensively in report preceding the meeting. You may recall other reports from last week saying the BOJ was pondering ways to convey that it may begin tightening. There was nothing in the revised forecasts to suggest this sort of communication is in any way imminent. USD/JPY and yen crosses jumped upon the statement release and is back towards (not quite to) 115. There is more on the BOJ in the bullets above.
Earlier in the session we had the reopening of US treasury trade, with yields jumping higher. After Governor Waller of the Fed said last week he was not thinking about a 50bp hike in March he seems to have ignited at least some in the markets thinking this could happen (this from over the weekend, for example: Hedge fund manager Ackman - Fed needs to restore its credibility, 50bp rate hike in March ).
This appears to have contributed, at least partially, to the jump higher for yields. FX responded, though, by marking currencies higher against the USD initially.
As I post the weaker US dollar move has now fully, and very quickly, reversed. EUR, AUD, GBP, NZD, CHF, CAD are all now getting hit lower against the US dollar. Yields on USTs are rising yet again. This is also sapping 'risk' elsewhere, US equity index futures are being hit on Globex.
As guide (this’ll be out of date by the time you read it but it’ll give you an idea of the gains for yield):
- 10 year higher than 1.85%
- 5 year 1.64%
- 2 year 1.05%
Oil surged higher during the session, Brent to its highest in 7 years (see bullets above).
Also, take note of the Russia - Ukraine news (from the New York Times) in the bullets above. Tensions here are not going away any time soon.
EUR/USD as an example of the steep rise for the USD:
