USD/JPY Traded Lower And Remains Under Pressure
Market movers today
In the US, we will get the FOMC minutes from the October/November meeting and core capex orders for October. The last FOMC meeting revealed no new information and we do not expect much news from the minutes either – the Fed is on track to deliver another hike in December. Looking at core capex, it has been trending upwards since the spring in line with regional capex plan surveys. These suggest core capex orders growth of around 1.0% in October but the monthly changes are very volatile.
In the UK, we get Chancellor Philip Hammond’s autumn budgetst atement to parliament at 13:30 CET.
The Swedish Riksbank’s financial stability report is likely to draw attention, given the turnaround in the housing market .
In Norway, we expect LFS jobless rate to remain stable at 4.1% in September.
In Denmark, we expect a further drop in consumer confidence November to 6.8.
Selected market news
Fed Chairman Janet Yellen last night warned about rising rates too quickly and allow inflation to drift down and over time not to achieve the central bank’s 2% inflation target . According to Bloomberg, Yellen said t hat “ One reason it ’s dangerous is because inflation expect ations are likely to also drift down and indeed there is some evidence – I don’t really think they’ve drifted down very much – but t here’s some suggestion.”
Meanwhile the US yield curve continued to flatten yesterday with the 2Y-10Y US Treasury yield spread declining to 58bp. Interest ingly, the flattening of the yield curve yesterday continued despite a solid rebound in risk appet ite which underscores that the downward pressure on longer dated bonds (flat tening pressure) is not just a risk-off move, but also reflects that the market is increasingly buying into the views that inflation will stay low for a prolonged period and that the ‘neutral rate’ will continue to stay very low.
In the FX market , the flattening pressure on global yield curves could be a game changer for JPY, which has seen substant ial weakening pressure driven by higher global yields over the past year. Yesterday, USD/JPY also traded lower and remains under pressure this morning despite the positive development in Japanese equity markets.
In Germany, Chancellor Angela Merkel still struggles to form government. Yesterday Merkel stated that she favours a new poll over a minority government. However, according to the media, Merkel’s CDU part y is still betting on a revived “ grand coalition” with the SPD party hoping that increased public and political pressure on the SPD could change the SPD stance on not to rerun the “ grand coalition”
