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On May 5, according to CMEs "Fed Watch": The probability of the Fed keeping interest rates unchanged in May is 96.8%, and the probability of a 25 basis point rate cut is 3.2%. The probability of the Fed keeping interest rates unchanged in June is 63.3%, the probability of a cumulative 25 basis point rate cut is 35.6%, and the probability of a cumulative 50 basis point rate cut is 1.1%.Spot gold opened basically flat on Monday, currently trading at $3,243.89 an ounce.1. Chechen leader: Ukrainian troops try to return to Kursk. 2. Temporary restrictions imposed at Vnukovo Airport in Moscow, Russia. 3. Ukrainian military: 69 drones launched by Russia were shot down overnight. 4. Putin said he has been considering the issue of succession, but the final choice will be made by the Russian people. 5. According to Interfax: Russian President Putin said that we have enough strength and means to push the conflict with Ukraine to a reasonable end. 6. According to Ukrainian Pravda: The General Staff of the Ukrainian Armed Forces said that in the past 24 hours, the Russian army lost two fighter planes, 1,340 soldiers were killed or wounded, and 11 tanks.On May 5, Japans attitude towards using U.S. debt as a negotiating tool with the United States reversed again. According to Nikkei News, Japanese Finance Minister Katsunobu Kato said on Sunday (May 4) that Japan has no intention of using the possibility of selling its holdings of U.S. Treasury bonds to gain an advantage in trade negotiations with the United States, and Japan does not consider the sale of U.S. Treasury bonds to be a tool for Japan-U.S. negotiations. Katsunobu Kato said last Friday that although Japan would not easily sell its holdings of U.S. Treasury bonds, they were a "card" for negotiations with the United States on trade issues; he overturned this statement at a press conference on Sunday. The Japanese Ministry of Finance reported that as of the end of March, Japan held $1.27 trillion in foreign exchange reserves, most of which were U.S. Treasury bonds. Foreign exchange reserves can be used to intervene in the foreign exchange market. In April, Katsunobu Kato ruled out the possibility of using Japans holdings of U.S. Treasury bonds as a negotiating tool.On May 5, the Israeli Prime Ministers Office issued a statement on the evening of May 4 local time, saying that Israel will retaliate against the Houthi armed forces and their ally Iran in response to the missile attack on Tel Avivs Ben-Gurion International Airport earlier that day. The statement said that the attack by the Houthi armed forces in Yemen "originated from Iran" and Israel will choose the time and place to take action against Iran, the force behind the Houthi armed forces. Iran has not responded to this yet.

US Dollar/JPY Yields May Fall Below 131,000 Ahead of Vice President Joe Biden's SOTU Address

Daniel Rogers

Feb 08, 2023 14:39

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At 130.90, the USD/JPY is under pressure, extending yesterday's decline from the highest level in a month. In doing so, the Yen pair tracks the recent decrease in US Treasury bond yields despite a dismal start to Tokyo trading on Wednesday. In recent times, geopolitical concerns have combined contradictory Japan data and Fedspeak to weigh on the market.

 

At the time of publication, rates on 10-year US Treasury notes reversed a three-day increase while retreating from a one-month high of approximately 3.68 percent to 3.67%. The US Dollar Index (DXY) has fallen for the second consecutive day to approximately 103.30. In spite of this, S&P 500 Futures exhibit minor losses, mirroring Wall Street and reflecting a negative sentiment.

 

Japan's trade deficit decreased to -1,225.6B from -1,814.6B expected and -1,537.8B earlier, while the Current Account balance decreased to 33.4B from -1,803.6B and 98.4B.

 

President of the Federal Reserve Bank of Minneapolis Neel Kashkari told CNN, "We may have to maintain higher interest rates for a longer period of time," adding that he does not anticipate a recession. Jerome Powell, chairman of the Federal Reserve, then declared, "Expect 2023 to be a year of large declines in inflation," adding that if data continued to come in better than anticipated, he would certainly boost rates further.

 

Notably, optimism surrounding the Japanese government's wage negotiations with labor leaders in March appears to have fuelled optimism at home. However, China's denial of the Pentagon's request maintains the geopolitical tension at a high level.

 

Traders of the USD/JPY pair should rely on Bank of Japan (BoJ) discussions to target more losses, especially in light of recent hawkish concerns surrounding the Japanese central bank. Today's State of the Union (SOTU) speech by United States Vice President Joe Biden will also be vital to follow. Reuters said prior to the event, "US Vice President Joe Biden will face Republicans who question his legitimacy and a public apprehensive about the country's direction during Tuesday's State of the Union address, which is expected to serve as a blueprint for a 2024 re-election attempt,"


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