STIR: No Chance Of Hike Priced For Friday But 25bps+ Priced For July
BOJ-dated OIS assigns a near-zero probability to a 25bp hike at Friday’s meeting, consistent with the Bloomberg-surveyed analyst consensus.
- Beyond January, the curve is 4–14bps firmer than pre-December MPM levels, led by the October meeting.
- This pricing implies roughly a 19% probability of a 25bp hike in March, rising to around 115% by July and 166% by October, signaling expectations for more than one hike by late 2026.
Figure 1: BoJ-Dated OIS – Today Vs. Pre-Dec MPM
Source: Bloomberg Finance LP / MNI
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JPY: USD/JPY Edges Down, As FX Diplomat Says Will Take Appropriate Action
USD/JPY sits off earlier highs, last 157.50/55. Earlier we got to 157.75, which was just short of Friday highs. Helping nudge USD/JPY a little lower has been comments from the top FX diplomat who stated concern around the FX moves (describing them as rapid and one-sided) and that the authorities will take appropriate action against FX moves (via RTRS).
- This may signal near term resistance to a break above 158.00 in the pair, although intervention risks may not be imminent. Comments like: “We won’t rule out any options/means to combat excessive movements.” “We’re ready to take decisive/bold action to counter excessive/speculative moves:” (via BBG) haven't crossed yet, but may be needed for the market to turn more mindful of intervention risks.
AUD: AUD/JPY - Extends Above 104.00 On Friday, Look For Dips To Be Supported
The Friday night range was 103.02 - 104.34, Asia is currently trading around 104.20. The pair broke back above the 103.30 area after the BOJ and extended higher on strong momentum. Risk has bounced back and closed strongly for the week. On the day, watch for some reversion back to the mean but I suspect dips could now be supported. The first support is back toward the 103.50-103.80 area where I suspect buyers will be looking to engage looking for a test of the 105.00 area at some point.
- The AUD/JPY Average True Range(ATR) for the last 10 Trading days: 78 Points
Fig 1: AUD/JPY spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
US STOCKS: S&P(ESH6) - Opens Up Above 6900, Building On The Strong Weekly Close
The S&P(ESH6) Friday night range was 6827.50 - 6895.25, SPX closed +0.88%, Asia is currently trading around {ESA Index}. The futures closed strongly to end the week holding onto its gains after the dip in the middle of the week was well supported. This morning futures have opened a little higher trying to build on last week's close, E-minis(S&P) +0.25%, NQZ5 +0.35%. I continue to be wary of stocks up here but it is very tough to try and fight this price action for the moment. On the day in the (ESH6) futures, support now lies toward 6820-6850 as the market begins to eye the highs back toward the 7000 area again.
- Andy Constan on X: “By far the most bullish signal I follow is equity supply and demand (flow). Even in weak HH savings growth environments and weak private sector credit growth when equity supply shrinks at 2% of GDP it's hard for stocks to fall."
- Eliant Capital on X: “Despite the rally off the November lows and indices holding relatively near their highs, equity positioning still remains far from stretched. Overall exposure is only modestly overweight and well below earlier on in the year highs, whilst discretionary investors have remained underweight for most of the year.”
- The S&P 500 Index Average True Range(ATR) for the last 10 Trading days: 72 Points
Fig 1: S&P 500 Index Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
