According to Jane Foley, senior FX strategist at Rabobank, today’s surge in JPY was likely exacerbated by thin liquidity due to a Japanese holiday, but the upwards bias has been very clear since the middle of last month.
Key Quotes
“While the bad news from Apple may has been the trigger for the move today, it has only served to enhance current market sensitivities.”
“Despite last month’s guidance from the Fed that it was on course to hike rates twice in 2019, yesterday Fed funds futures were suggesting a 91% probability that rates will finish the year at or below current levels – a sharp contrast with the outlook implied as recently as November. This change in market forecasts regarding the Fed has significant implications for the outlook of USD/JPY.”
“Given our expectation that the Fed is likely to hike rates only once this year and is facing a short technical recession in 2020 we would look to sell USD/JPY on rallies and see risk of USD/JPY ending the year around 105.”
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