Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

Free Trading Guides
Subscribe
Please try again
Select

Live Webinar Events

0

Economic Calendar Events

0

Notify me about

Live Webinar Events
Economic Calendar Events

H

High

M

Medium

L

Low
More View More
USD/JPY Under Pressure Following Comments from Fed’s Waller

USD/JPY Under Pressure Following Comments from Fed’s Waller

Brendan Fagan, Contributor

Share:

What's on this page

USD/JPY, US Dollar, Japanese Yen, Federal Reserve - Talking Points

  • Fed’s Waller calls for tapering of MBS before Treasuries, a view opposed by the Committee
  • USD/JPY may look to reverse course in tandem with US yields, US 10Y down as low as 1.14%
  • Stocks give up early gains into the closing bell, volatility and bonds remain bid
Equities Forecast
Equities Forecast
Recommended by Brendan Fagan
Get Your Free Equities Forecast
Get My Guide

Surprise comments from Christopher Waller, a voting member of the Federal Reserve Board of Governors, gave light to a vocal minority at the Federal Reserve on Monday. Waller stated that should the next two jobs prints be very strong, a taper in September could happen. Waller continued to indicate his preference to taper mortgage-backed securities before Treasuries, a move which is opposed by the majority of the Federal Open Markets Committee (FOMC). The view of Waller contradicts that of Fed Chair Jerome Powell, who remains adamant that the Federal Reserve will support the economy “by any means necessary” until the economic recovery is complete.

A hawkish tone from a member of the Federal Reserve Board of Governors may be enough to see USD/JPY reverse its recent slide. USD/JPY extended its recent decline as US Treasury yields continued lower on Monday, with the 10-year Treasury yield falling as low as 1.15%. US Treasury yields may look to turn higher should the taper debate begin to gather momentum. Currently, the debate surrounding a taper is dependent on labor market conditions, as noted by Jerome Powell in his FOMC press conference last Wednesday. With inflation targets largely satisfied, the Fed is now looking for “substantial further progress” on the labor market front. The Fed’s taper has the potential to take significant downward pressure off of US yields, and as Christopher Waller noted, that lift could come as soon as September.

US Economic Calendar

Courtesy of DailyFX Economic Calendar

Near-term sentiment and policy decision making will depend on economic data, with nonfarm payrolls due this Friday. Economic data on Monday came in lower than expected, with the ISM Manufacturing Index dropping to 59.5 from 60.6, well below estimates of 60.9. Additional worse-than-expected economic prints in the US may continue to exert downward pressure on USD/JPY. Strong data prints, which may be unlikely given the spread of the Delta Covid variant, have the potential to provide a bid to the Greenback. In the near-term, market participants may look to Friday’s July jobs report for further insight into potential Fed policy and market direction.

The Quiz
Discover what kind of forex trader you are
Start Quiz

USD/JPY Daily Chart

USD/JPY Chart

Chart provided by TradingView

--- Written by Brendan Fagan, Intern

To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES