Continued Nervous Trading – Spotlight on UK-Driven Catalysts
— Pound Weakness Becomes Clear, GBP-Led Price Action in Focus —
■ USD/JPY and Cross Yen Remain Firm, but Caution Prevails Near Highs
In Tokyo trading today, USD/JPY and cross-yen pairs remained resilient. However, USD/JPY only managed to recover losses from the previous overseas session and has yet to establish a firm foothold above the 150.00 level.
Price action remains jittery, with the move appearing to be driven mainly by short-covering rather than fresh buying.
Key background factors include:
- Month-end and fiscal year-end FX demand
- Comments from BoJ Governor Ueda:
- Maintains basic policy of rate hikes “if economic and price outlooks materialize”
- But also stated, “Monetary policy should not respond to temporary food inflation”
Markets interpreted this as a cautious stance on rate hikes, leading to renewed yen selling.
■ U.S. Rate Cut Expectations on Hold – Eyes on Fed’s Goolsbee
Fed’s Goolsbee (Chicago Fed President) commented:
- “Due to economic uncertainty, rate cuts may take longer than expected”
- “The Fed may have veered off the ‘golden path’ seen in 2023–2024”
The remarks were interpreted as a delay in Fed rate cuts, providing underlying support for the dollar.
■ Today’s Main Catalyst Comes from the UK – All Eyes on CPI & Budget
Markets are now closely watching two major UK events:
① UK February CPI (16:00 JST)
- Headline YoY CPI: +3.0% (expected) = unchanged from previous
- Core CPI: +3.6% (expected) vs. +3.7% prior
- Services inflation: +4.9% (expected) vs. +5.0% prior
→ A slight softening is expected overall, though inflation remains well above the BoE’s 2% target, continuing to pressure household consumption.
→ The actual CPI came in below expectations, triggering a sharp drop in GBP.
With over 80% of the market now pricing in a BoE rate cut in May, the pound has entered a downward retracement phase.
② UK Budget & OBR Outlook (21:00 JST) – Chancellor Rachel Reeves
- Focus on spending cuts, corporate tax hikes, and minimum wage increases
- Economic growth forecast likely to be revised lower
→ The fiscal stance appears neutral to slightly negative, raising the risk of further GBP downside.
However, as markets may have already priced this in, the move could be short-lived.
■ Limited Market Impact Expected from U.S. Data
Today’s U.S. economic releases:
- MBA Mortgage Applications
- February Durable Goods Orders (Prelim)
- Headline: -1.0% MoM (expected) vs. +3.2% prior
- Ex-transportation: +0.2% MoM (expected) vs. ±0.0% prior
→ Even if the data disappoints, the impact on USD/JPY is expected to be muted.
■ Volatility Risk from Central Bank Speakers, Auctions & Oil Inventories
Speeches:
- Eurozone: Villeroy (France), Knot (Netherlands), Cipollone (ECB)
- U.S.: Kashkari (Minneapolis Fed), Musalem (St. Louis Fed)
Auctions:
- U.S. 2-Year FRN: $28B
- U.S. 5-Year Note: $70B
Energy:
- U.S. EIA Weekly Crude Oil Inventories
→ None of these are likely to cause major moves on their own, but beware of stop hunts during low liquidity periods.
■ Trade Strategy: Maintain Bearish GBP Bias
UK CPI missed expectations, and GBP sold off sharply.
With May rate cut expectations intensifying, a sell-on-rally strategy remains the base case.
Should the budget release turn out more negative than anticipated, another leg lower could develop during London–NY hours.
→ Currently considering building short positions in GBP/USD and GBP/JPY, timing entries carefully.
