USD/JPY and the front end of the bond market are moving in tandem at the moment.

US 2 year yields

The thinking is that we might get a top here in the front end as we've priced in maximum hiking for now.

Powell did two things:

  • He took 75 bps off the table for the next meeting
  • He only put 50 bps on the table for the next two meetings (market was pricing in at least 3)

The market was looking for a signal that we've hit a crest in rate hikes and Powell offered that in the clearest terms. There's a clear plan to get to around 2% or 2.50% then re-evaluate. Powell certainly indicated there could be more but markets love certainty and two 50 bps hikes offers certainty through the summer.