Westpac write a “case for a quick USD/JPY reversal seems to be developing.”

• “The hawkish repricing in U.S. rates has lost momentum.”
• “Long term U.S. yields are more appropriately calibrated for a bumpier disinflation glidepath and 3% growth, than they were at the start of the year.”
• “Fed fund expectations are not as obviously skewed relative to the Fed’s dots either.”
• “The “no landing” narrative has legs, but it’s not clear conditions are ripe for either Fed officials or markets to seriously contemplate pricing just -50bp or -25bp in Fed cuts this year.”
• “On the JPY-leg, Q2 BoJ rate hike bets are solidifying, and JPY intervention risk lurks at higher levels.”
• “There’s surely better value selling USD/JPY into 151 as a short-term trade. But we have a hard time seeing USD/JPY trading sustainably lower, say sub-146, due to ongoing structural JPY headwinds.”