FOREX: Best Wage Growth in Over 30 Years Underpins JPY Convincing Rally
Feb-05 10:21
- JPY strength stands out into the Wednesday crossover, with USD/JPY breaking to new pullback lows and taking out both the 200- and 100-dmas in the process. This marks a major technical break lower and expands the downside range, with markets looking to 151.06 as the next significant support. Late January lows at 153.72 were twice tested, a level that coincided with the 50% retracement for the upleg posted off the December low, raising the significance of this morning's price action.
- Japanese wages numbers have proved key here. Nominal wages rose at the fastest pace in over 25 years for the December Y/Y reading - removing another hurdle to the next tightening phase from the Bank of Japan. The next 25bps hike isn't well priced until the September meeting - leaving the front-end of the OIS curve with plenty of room to tighten further should this trend be sustained.
- The greenback is the worst performer in G10, as markets pick up on the prevailing theme from the late Tuesday session. The scale of the short-term USD Index pullback is noteworthy, but is yet to challenge to the underlying uptrend. It's when the index drops through 106.969 that markets will become more concerned - particularly if tied with a convicingly dovish turn in Fed pricing for 2025.
- ISM services data crosses later today after the final PMIs for January. The employment subcomponent should take particular focus given the proximity to Friday's payrolls print, for which today's ADP Employment Change should also feature. Markets expect services to remain the stronger driver of US growth, while ADP is seen ticking higher to +150k from +122k.
- Central bank speak picks up today after a quieter start to the week. Lane speaks from the ECB, while Barkin, Goolsbee and Bowman represent the FOMC.
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Historical bullets
EURIBOR: Put fly seller
Jan-06 10:19
ERH5 97.62/97.50/97.37p fly sold at 3 in 4k.
US TSY FLOWS: Block trade
Jan-06 10:16
10yr Block trade suggest buyer:
- TYH5 5k at 108.15.
US TSY FLOWS: Bouncing off the lows
Jan-06 10:09
- Some order related bid in Treasuries helps the strip off its low with a pick up in Volumes as we slowly head into the US session.
- TY is bought in 7k, FV 6k and US 2k, all cumulative volumes, but futures contract remain well within the European ranges.
