At Any Rate Global FX: Hawkish Fed & dovish BoJ force a Yen forecast rethink
Oct 31, 2025
Join Patrick Locke, a Senior Macro FX Strategist at JPMorgan, and Junya Tanase, Head of Japan FX Research, as they unpack recent developments in global currencies. They analyze the hawkish Fed's surprising remarks and their implications for the dollar. Junya sheds light on the unexpected dovish stance of the Bank of Japan and the potential risks for the yen. They also discuss the revised USD/JPY forecast and the influence of recent political events in Asia on FX markets. It's a fascinating dive into the ever-changing world of foreign exchange!
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Dollar Rally Driven By Real Yields
- The dollar rallied on a hawkish Fed surprise and higher USD/JPY, reversing the H1 configuration that had weakened the dollar.
- Falling front-end US inflation break-evens pushed front-end real yields higher, supporting dollar strength and challenging dollar bears.
Powell Reopens December Uncertainty
- Jerome Powell's press conference pushed back on market easing bets, making December uncertain and lifting the dollar.
- The market mostly repriced near-term meetings only, leaving longer-run terminal rate expectations broadly unchanged.
Monitor Near-Term US Labor Data
- Watch upcoming US labor releases closely because one or two weak prints could tilt the Fed back toward easing.
- Treat recent Fed hawkishness as time-limited optionality rather than a permanent shift in policy path.