USD/JPY vs US Treasury 10-year yields (%) each day chart
10-year yields within the US are actually down by 5.5 bps to three.625% and that’s weighing additional on USD/JPY at this time. The pair is now down 1% to contemporary lows at 140.43 and that’s bringing nearer the December 2023 low at 140.24 in addition to the 140.00 mark. The bounce early yesterday was actually short-lived, that particularly as merchants proceed to cost in stronger odds of a 50 bps charge minimize by the Fed subsequent week.
As issues stand, Fed funds futures are displaying ~116 bps of charge cuts by year-end. Personally, I nonetheless assume that is a step too far however merchants aren’t backing down from their conviction this week. The percentages of a 50 bps charge minimize subsequent week are actually at ~41%.
Anyway, a key chart to look at for the greenback and USD/JPY as we glance to shut out the week shall be 2-year yields.
US Treasury 2-year yields (%) month-to-month chart
It’s staying near the 2023 low close to 3.55% at present. A break decrease there is perhaps overstepping by way of Fed pricing however one cannot actually rule that out at this level.
This market tends to overreact earlier than operating again that pricing if they can not bully the Fed to get their method. That is what we noticed earlier than with the supposed six charge cuts priced in for 2024 on the finish of final yr.
