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Goldman Sachs discusses the key drivers for USD/JPY performance this year.
- "We continue to expect US real rates rather than BoJ policy expectations to be the bigger driver of USD/JPY performance this year. In an environment of rising US yields, the Yen tends to underperform, even when US equities are selling-off (which typically supports the Yen on the margin), similar to the price action seen in the days following the US nonfarm payrolls report," GS notes.
- "For this reason, we continue to forecast some incremental Yen underperformance—even with generally higher odds of a hawkish BoJ policy shift—as we expect the incoming US activity data to increasingly confirm a soft landing and the rates market to subsequently price out Fed cuts this year, pushing up US yields," GS adds.
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A timely point made by Goldman Sachs in light of the warm CPI data published Tuesday:
Headline m/m CPI 0.4% (vs +0.0% expected) while Core m/m +0.4% (vs +0.4% exp)
