USD/JPY Defies Soft US Data, BOJ Hike Expectations
Recent US data has been softer than expected, which should have boosted the Japanese yen. However, this hasn't affected the USD/JPY exchange rate, which continues to push towards multi-decade highs.
The US non-farm payrolls, CPI report, and PPI overnight all showed downside surprises, which reduced Fed rate hike pricing over the next year from 64 basis points to 36 basis points. This hasn't stopped USD/JPY from climbing, however.
Speculation that the Bank of Japan could move rates earlier than expected has been intense. Yet even with faster BOJ hikes and softer US data, the upward trend in USD/JPY remains unchanged.
The correlation matrix shows a strong positive relationship between USD/JPY and short and longer-dated US Treasury yields over the past week. The pair is also positively correlated with energy prices, particularly Brent.