⚖️💹Nominal Rate Spreads May Cap USD/JPY Upside: Cable FX Macro

• Macroeconomic developments have been driving the recent yen devaluation, as rate differentials favour the dollar against G10 peers. Despite the BoJ starting its monetary tightening cycle in March, the premium on U.S. rates remains attractive for investors

• USD/JPY performed a decent rebound after Japanese monetary authorities intervened to defend the year. The pull back opened the opportunity to enter the trade at better levels as fundamentals support equilibrium to be penciled higher

• Our measure of USD nominal rates vs the G10, the Cable FX Macro USD Spreads Index, has been positively correlated to USD/JPY and the yen is tracking a positive beta over the last year. The index is now at the lowest level since early April, if it fails to bounce, dollar upside could be capped ahead of 160.0