Tokyo’s inflation data surprised the market to the downside due to a larger-than- anticipated effect of the government’s energy subsidies. The data briefly weighed on the JPY as investors slightly reduced the chances of the BoJ continuing to raise rates around the middle of the year. But with BoJ Governor Kazuo Ueda previously communicating that he will be taking into account the government’s subsidies and expressing concerns that higher food prices inflation could be long lasting, investors are continuing to bet the central bank will raise rates again in the coming months.
Relative US-Japan rates have not been the only driver of USD/JPY this week. Threats of Trump tariffs have also generated volatility in the exchange rate. Indeed, according to a preliminary update of our FAST FX model for USD/JPY, the exchange rate’s fair value has plummeted from 152.33 to 147.87 due to falls in the US-Japan short-term rates differential as well as the US-Japan box yield spread as US economic data has faltered this week. But a fall in global equities as Trump’s protectionist rhetoric has also weighed on USD/JPY’s fair value. The final update of the model will occur at the New York close today. USD/JPY remains stuck around our Q1 target of 150 and would become significantly overvalued above 152.00.
The JPY’s short-term fair value against the EUR has also surged. EUR/JPY’s fair value has fallen from 154.87 to 152.93 due to falls in the Eurozone-Japan short- term rates spread and the Eurozone-Japan commodities terms-of-trade ratio as well as rises in the Eurozone-Japan box yield spread, the peripheral EGB yield spread to Bunds and the outperformance of Japan equities by Eurozone equities. EUR/JPY would become significantly overvalued above 157.00.
Relative US-Japan rates have not been the only driver of USD/JPY this week. Threats of Trump tariffs have also generated volatility in the exchange rate. Indeed, according to a preliminary update of our FAST FX model for USD/JPY, the exchange rate’s fair value has plummeted from 152.33 to 147.87 due to falls in the US-Japan short-term rates differential as well as the US-Japan box yield spread as US economic data has faltered this week. But a fall in global equities as Trump’s protectionist rhetoric has also weighed on USD/JPY’s fair value. The final update of the model will occur at the New York close today. USD/JPY remains stuck around our Q1 target of 150 and would become significantly overvalued above 152.00.
The JPY’s short-term fair value against the EUR has also surged. EUR/JPY’s fair value has fallen from 154.87 to 152.93 due to falls in the Eurozone-Japan short- term rates spread and the Eurozone-Japan commodities terms-of-trade ratio as well as rises in the Eurozone-Japan box yield spread, the peripheral EGB yield spread to Bunds and the outperformance of Japan equities by Eurozone equities. EUR/JPY would become significantly overvalued above 157.00.
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1. AccuTrade System:
tradingview.com/v/yDFPnb1J/
2. Signal Performance:
thedailyfx.com/performance/
3. Best Forex EA:
thedailyfx.com/beetle-ea/
4. Free Forex VPS:
myfxvps.com/get-it-free/
tradingview.com/v/yDFPnb1J/
2. Signal Performance:
thedailyfx.com/performance/
3. Best Forex EA:
thedailyfx.com/beetle-ea/
4. Free Forex VPS:
myfxvps.com/get-it-free/
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.