FXStreet (Barcelona) – Sean Callow of Westpac, sees the FOMC meeting and US data releases ahead to support the US yields and the dollar.
Key Quotes
“Short term, USD is more likely than JPY to provide the fuel for USD/JPY gains. In recent days the rise in US treasury yields drove the pickup on 10 year T-notes over 10 year Japanese government bonds to almost 200bp, reaching highs since Sep 2014. We expect next week’s FOMC meeting and the broad tone of US data in coming weeks to support US yields and thus USD. Westpac’s baseline view remains that the Fed will raise the funds rate to 0.25-0.50% in Sep, an outcome only 50% priced in.”
“Such a prospect should encourage Japanese investors to continue seeking the yield premium on US bonds, supporting USD/JPY on dips.”
“A resilient USD should also help cap near term gains in the likes of AUD, GBP and EUR (a compromise on Greece?). It should also add to the reasons to sell NZD/USD, after the RBNZ cut its cash rate and indicated there is more to come.”
(Market News Provided by FXstreet)