EUR/USD, USD/JPY flows: Focus still on bond-risk-FX interplay
Focal point still on ris9ing yields and the interplay with risk, and then to FX
USD/JPY finds supply and some rotation to CHF; maybe signs of tightening and renewed risk support
Bond yield pressure and spillover to risk sentiment remains a key focal point as the renewed US strikes add to the pressure. Brent back up to $95.5 on the front month but distillates more the immediate concern too into the winter.
US10s continue to inch out, clearing 4.8%, with the same elsewhere, JP10s holding a break above 3%. On the latter front, Sep BoJ hike odds now up to above 75% after hints from Ueda and board member Takata that it is on the next meeting agenda
Feedback to risk is being felt, if moderately today, with copper, Nasdaq, Kospi (-4%) all lower for example.
Interesting price action on the yen stands out, USD/JPY selling back from the 160.40 test back to the 159.40 hourly support but in fairly controlled intraday selling fashion rather than anything more external looking. Exporter sales supply dragging apparently, but we may also be starting to see some risk aversion yen support come through, and as BoJ tightening bets build. There is some renewed short JPY to CHF rotation on show too (remembering latter is very much the last of the low yielders – ZIRP in fact), that cross dropping back to 196 from 198 the last few days.
Near-term, focus looks set to remain on the interplay from bonds to risk (and back), and with that to potential risk off FX bias