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USD/JPY: Dollar, yields rise as hike bets increase

Fawad Razaqzada Fawad Razaqzada 16/11/2021
USD/JPY: Dollar, yields rise as hike bets increase USD/JPY: Dollar, yields rise as hike bets increase
USD/JPY: Dollar, yields rise as hike bets increase Fawad Razaqzada
It was expected that much of the attention was going to be on US retail sales data today and earnings from some of the major US retailer, with some analysts expecting to see lower levels of sales because of the upsurge in price pressures and the hit in consumer sentiment. However, that wasn’t the case. Retail sales came in higher than expected and Walmart posted a much bigger revenue than expected. The markets initially didn’t respond much to the data. But the dollar started to pick up momentum shortly after. It was the Fed’s James Bullard who stole the show, as the St. Louis Fed President delivered some hawkish remarks.
 
Bullard’s comments – and the consumer sales data – helped to send the US 10-year yield rises to 1.635%, its highest level since October 26. Correspondingly, the dollar extended its gains and precious metals turned lower. The dollar rose most notably against the euro and yen, currencies where the central bank remains very dovish. Commodity dollars and emerging market currencies sold off too, with the Turkish lira slumping to a fresh record low – a daily occurrence now. As EM sold off, concerns over demand for things like oil rose, and this caused Brent and WTI to drop.
 

Bullard’s hawkish remarks

 
With the market pricing in sooner rate hikes in recent days, following another big jump in inflation, it looks like the Fed is trying to get itself in line with the market expectations. James Bullard said: “I think we’ve gotten past the taper-tantrum issue because we went ahead with the taper. We could move faster -- we kept optionality on this that we could speed up the taper if it is appropriate,”
 
Some of the other notable headlines that came from his speech include:
 
  • MAKES SENSE TO MOVE MORE HAWKISHLY, MANAGE PRICE RISK
  • FED TAPER INCREASED TO $30B PER MONTH WOULD OPEN DOOR TO RATE INCREASE END OF Q1 2022
  • CORE PCE IS "QUITE HIGH," FED SHOULD TAKE TOWARDS MORE HAWKISH POLICY IN NEXT COUPLE OF MEETINGS
 

US retail sales beat but dollar little further upside

 
US Dollar showed very mild reaction even as sales beat expectations quite easily. Headline retail sales for October came in at +1.7% versus +1.2% expected. Sales ex auto also beat at +1.7% versus +1.0% estimate.
 

Who will lead the Fed?

 
Traders are also keeping an eye on a decision from the White House on who the next Federal Reserve Chair will be and how that in turn might impact US monetary policy. In the race are both the incumbent Chair Jerome Powell and Fed Governor Lael Brainard. They have both been interviewed for the top job. A decision on the appointment is expected very soon.
 
 
There’s been some speculation that Fed policy tightening could be slowed down under Brainard’s leadership. This partly explains why the US stock market has yet to respond meaningfully to the upsurge in inflation and increased bets on policy tightening. Earlier this month, news of Brainard’s potential appointment had sent bond yields lower as the markets assumed she would be a much more dovish candidate than Powell.
 
 

USD/JPY 115.00 looks imminent

 
One of the major FX pairs with the most straight-forward reaction to increasing bets over tighter monetary policy in the US has been the USD/JPY. It broke out again today after spending the last couple of days in a tight consolidation range. It looks like 115.00 is almost imminent:
 
USD/JPYSource: ThinkMarkets and TradingView.com
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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