EUR/USD, USD/JPY flows - Digesting Wed's PMI and yield surge

FX taking a breather after Wed’s US Treasury yield and dollar charge, with US10s sitting just off the burst to 5.13% on the hot data and 2s up to 4.9% closing in on 5%, hawkish Fed comments and weak 5yr auction (lowest bid/cover in 4 years) also with the grain. The break away from 5% obviously makes the market jittery about a run to the 5 ¼ tops (5.2-5.33%) from 2006-7. 

Yesterday’s PMI was quite a game changer in terms of market perception of the current fundamental picture, so upcoming data will be key now to see if they corroborate this move from energy price strength narrative to heated macro picture. Fed back-to-back hikes, ahead of the mid terms, now sit at odds of around 70% and that pace change is the key factor for dollar flow through nearby. 

Meanwhile ex-BoJ board member Sakurai suggests the BoJ will hike every quarter to 2% by June, after revising up its inflation forecasts in Oct.

This morning does have a detour with the focus shifting to SNB, Riksbank, and Norges bank. The first two are seen unchanged if still of interest for direction, but the Norge Bank is in the spotlight with current hike bets sitting around 65%. Prior to that, oil prices hold their bounce, with Brent sitting around $103 as hopes for talk progress drift.