Echoes from Japan: Yen Strengthens, Market Calls Fed Bluff, Becoming Japan

In this Midweek Macro Note the MacroEdge team discusses the Yen, FOMC decision, yields, Japanese CPI, technicals, selling strength, & more. #MacroEdge

Good Wednesday evening, MacroEdge readers and clients,

This evening, we’ll review what we saw from Powell today, as well as the continued pressures on equities, which have been largely rangebound since last July due to the original carry trade unwind 1.0—until the BoJ and other central banks eventually intervened. While the Fed appears to be refocusing on accelerating goods inflation, I am shifting my focus away from the subject, as I anticipate that the impact of tariffs will be notable but not the primary market driver (even though they may serve as an underlying force).

You can find an outline of key risks for the year in a February article titled Standing on K2. While Japan has Mount Fuji, the U.S. economy is in a more fragile position—standing on K2—and we must closely monitor trends that could push us toward a "descent." I now consider the "ascent" of 2020-2025 largely complete, based on indicators such as valuations, the attempted wind-down of Yellen-era policies, and more. While valuations are not precise timing instruments, when combined with other "hard data," as Powell referred to today, we can draw meaningful conclusions about market trends.

Japan’s Mount Fuji:

Our current market dynamics - ‘Standing on K2’:

MacroEdge Trident, Powered by Vision

MacroEdge Vision, a division of MacroEdge, has launched the development of Trident, designed to capitalize on global macroeconomic trends and tail risk events with precision and agility. We’ll have more on Trident in the Friday evening Redeye Macro Note - when we discuss Japanese CPI.

We’ll dive into the data for the remainder of the week, global rate movement, Australian employment, the Yen, technicals, the FOMC decision/Powell, and Japanese CPI below: