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As guide (this’ll be out of date by the time you read it but it’ll give you an idea of the gains for yield):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:

eurusd chart 18 January 2022