The priced-in market view implied in Fed Funds futures following the announcement (June’s FOMC meeting,) is more aggressive still, envisioning one hike in 2022 and two more in the following year. As it happens, the process that the Fed is slowly initiating finds most global policy rates having converged on Japan – that is, toward zero and sometimes beyond it, into negative territory – amid the onset of the Covid-19 pandemic. Recovering from these depths in most places is expected to come alongside reflation.
Japan is a familiar exception. Here, structural forces holding down prices for the better part of 30 years and inspiring an epic (and mostly fruitless) BOJ counteroffensive remain in play. What this means is that real interest rates – that is, nominal yields discounted by the expected rate of inflation – are higher in Japan than most of the G10. Since most nominal rates have converged near zero, the size of the inflation haircut has become pivotal. That is inherently small in Japan relative to global counterparts, so the inflation-adjusted yield to be had on JPY-denominated holdings emerged as more attractive. The BOJ policy of capping 10-year yields at 0% is an obvious headwind here, but it seems fragile. The central bank already owns almost half of Japan’s bond issuance to sustain it. Scope to do more seems limited, lest the monetary authority and the government itself be accused of outright debt monetization, an international taboo.
Of the major currencies, the Yen’s most pronounced advantage in this sense seems to be against the British Pound. As inflation fears push the Fed moves to pressure nominal rates upward globally, Japan’s real-yield advantage seems likely to expand further.
GBP/JPY Short (Sell) Enter At: 151.959 T.P_1: 148.754 T.P_2: 145.092 S.L: 156.143
All information on this website is of a general nature. The information is not adapted to conditions that are specific to your person or entity. The information provided can not be considered as personal, professional or legal advice or investment advice to the user.
Signal Factory is not represented as a registered investment consultant or brokerage dealer nor offers to buy or sell any of the financial instruments mentioned in the service offered.
While Signal Factory believes that the content provided is accurate, there are no explicit or implied warranties of accuracy. The information provided is believed to be reliable; Signal Factory does not guarantee the accuracy or completeness of the information provided. Third parties refer to Signal Factory to provide technology and information if a third party fails, and then there is a risk that the information may be delayed or not delivered at all.
All information and comments contained on this website, including but not limited to, opinions, analyzes, news, prices, research, and general, do not constitute investment advice or an invitation to buy or sell any type of instrument. Signal Factory assumes no responsibility for any loss or damage that may result, directly or indirectly, from the use or dependence on such information.
All information contained on this web site is a personal opinion or belief of the author. None of these data is a recommendation or financial advice in any sense, also within the meaning of any commercial act or law. Writers, publishers and affiliates of Signal Factory are not responsible for your trading in any way.
The information and opinions contained in the site are provided for information only and for educational reasons, should never be considered as direct or indirect advice to open a trading account and / or invest money in Forex trading with any Forex company . Signal Factory assumes no responsibility for any decisions taken by the user to create a merchant account with any of the brokers listed on this website. Anyone who decides to set up a merchant account or use the services, free of charge or paid, to any of the Forex companies mentioned on this website, bears full responsibility for their actions.
Any institution that offers a service and is listed on this website, including forex brokers, financial companies and other institutions, is present only for informational purposes. All ratings, ratings, banners, reviews, or other information found for any of the above-mentioned institutions are provided in a strictly objective manner and according to the best possible reflection of the materials on the official website of the company.
Forex trading is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against merchants. Before each Forex investment, you should carefully consider your goals, past experience and risk level. The opinions and data contained on this site should not be considered as suggestions or advice for the sale or purchase of currency or other instruments. Past results do not show or guarantee future results.
Neither Signal Factory nor its affiliates ensure the accuracy of the content provided on this Site. You explicitly agree that viewing, visiting or using this website is at your own risk.