USD/JPY to grind higher on firm US inflation – Rabobank

This week, the market will be digesting the messages from Chinese and US economic data to decide whether ‘peak growth’ is a concern or whether it is too early to rein in risk appetite. While USD/JPY has recovered from last week’s lows, the existence of these concerns has likely capped upside potential for now, Jane Foley Senior, FX Strategist at Rabobank, reports.

‘Peak growth’ makes frequent appearances in market commentaries

“Our 1 and 3 month USD/JPY forecasts stand at 111.00. This assumes no sharp retrenchment of risk appetite through the summer which would benefit the JPY.” 

“We expect the debate regarding the potential for Fed tightening to keep the USD well supported while a dovish BoJ is likely to keep the carry trade alive for JPY based investors.”

“If US inflation is firm enough to keep alive the debate about the possibility of a Fed rate hike in late 2020, USD/JPY is likely to edge higher. That said, too much inflation or perhaps disappointing growth in China could see the JPY better supported if a broad based sell-off in risk appetite is triggered.”