At Any Rate Global FX: Japan & US policy implications for FX
Jul 19, 2025
Join Patrick Locke, a J.P. Morgan analyst focused on FX outlook, and James Nelligan, who specializes in UK data, as they dive into the impact of Japan's recent elections on fiscal policies and the yen. Hear their insights on U.S. monetary policy volatility and its ripple effects on the dollar. They also tackle the UK's economic challenges and the bearish outlook for the sterling amid stagflation fears. The discussion rounds out with trends in global FX reserves, signaling potential shifts in currency dynamics.
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Yen Weakness Reflects Fiscal Fears
- The Japanese yen weakness largely reflects market concerns over Japan's fiscal outlook tied to the upcoming election and tax cut debates.
- Official acknowledgment of yen selling and potential BOJ hawkishness may restrain further yen depreciation.
Dollar Behavior Linked to Fed Risks
- US dollar moves reflect a mix of fiscal concerns, market positioning, and volatile policy outlook including Fed chair rumors.
- The twist steepening in US rates after Fed chair firing rumors shows the dollar's sensitivity to policy risk premium shifts.
Sterling Weakness Driven By Growth
- UK sterling faces weakness mainly from slowing growth and labor market softness rather than inflation.
- Future Sterling weakness may intensify due to growth slowdown and fiscal uncertainty affecting market sentiment.