USDJPY Turns towars 114.00 on Sentiment Shift

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Market Drivers March 1, 2017
USD/JPY rallies post Trump
AU GDP beats
Nikkei 1.44% Dax 1.43%
Oil $54/bbl
Gold $1245/oz.

Europe and Asia:
AUD GDP 1.1% vs. 0.7%
GBP UK PMI Manufacturing 54.6 vs. 55.6

North America:
USD PCE 8:30
USD PI/PS 8:30
USD ISM Manufacturing 10:00
CAD BOC Rate Decision 10:00

USDJPY fueled by more hawkish rhetoric from Fed officials and promises by President Trump of up to a $1 Trillion spending on infrastructure, rose to fresh highs today in Asian and early European trade nearing the 114.00 figure as prospects of greater growth and higher rates excited currency traders.

Yesterday, at the end of New York close a series of Fed officials reiterated the point that US rates are likely to rise 3 rather 2 times this year and that the March meeting would be “live” meaning that the FOMC would seriously consider hiking rates at that time. Fed funds futures have now increased the chances of a Fed hike from less than 40% just a week ago to nearly 80% today.

The buck was also helped by President Trump’s speech to Congress where he stated his goal of spending $1 Trillion on infrastructure to help stimulate the economy and make proper capital investments. Although Mr. Trump provided no details, the market liked the idea of increased fiscal spending which could increase GDP growth above the 2% trendline level it’s been at for the past few years.

With ISM Manufacturing, PCE and Personal Income and Spending on the docket today, currency traders will have plenty of data to digest and if the US data continues to surprise to the upside USD/JPY will challenge the 114.00 figure as the day proceeds. Yesterday, the pair saw a major sentiment shift and those flows could continue for the rest of the week.

Boris Schlossberg
Managing Director

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