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JPY Down, NZD AUD Up on Expectations of Faster Growth Inflation; German CPI

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Rates as of 0500 GMT

Market Recap

JPY weakness continued to be a focus of the market as USDJPY hit the highest its been since March 25th last year almost exactly a year ago. This is despite betterthanexpected data out of Japan the February unemployment rate stayed at 2.9 vs. 3.0 expected and retail sales rose 3.1 mom vs 0.8 expected. This confirms the uselessness of Japanese economic indicators as a way of predicting where USDJPY will head, or maybe just confirms their function as a reverse indicator. But in this case even that didnt work the TOPIX was down 0.83, so the betterthanexpected data failed to trigger a riskon sentiment in the stock market perhaps because of the problems of Nomura? See below.

One culprit for the recent rise in USDJPY seems to be higher inflation expectations in the US. Tenyear inflation expectations have reached their highest level since March 2013.

Inflation expectations are up substantially even from a week ago. Perhaps the market is already discounting the economic impact of the Biden Administrations planned 3tn infrastructure spending plan, to be announced tomorrow. The Washington Post reported that it would focus on repairing physical infrastructure, reviving domestic manufacturing, investing in RD, and supporting clean energy. Other measures, such as childcare and healthcare, will be unveiled next month. The Post said that the plan could have as much as 4 trillion in new spending and more than 3 trillion in tax increases on…

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