Yesterday’s FOMC: Hawkish Pivot Boosts the Dollar

Yesterday’s FOMC: Hawkish Pivot Boosts the Dollar

by David Coulling Comment Closed
Yesterday’s FOMC: Hawkish Pivot Boosts the Dollar The Fed held the federal funds rate steady at 3.50%–3.75%, as widely expected. But the real story was in the details: The policy statement was dramatically shortened and stripped of forward guidance. The Summary of Economic Projections (dot plot) turned notably hawkish: nine officials now see at least one rate hike by year-end, with 2026 inflation forecasts revised higher (PCE to 3.6%). Warsh emphasised data-dependence, inflation as a “choice,” and a commitment to restoring credibility. Markets reacted with a risk-off move (stocks sold off), but the US Dollar Index (DXY) jumped, breaking toward the 99.50–100.00 zone. Higher US rate expectations relative to the rest of the world provided immediate support. This Morning’s BoE Decision: Further Tailwind for USD The Bank of England held its Bank Rate at 3.75%, in line with expectations, but the accompanying tone and vote split reinforced a more cautious stance amid soft UK labour data and easing inflation pressures. GBP/USD dropped over 100...
Read More
USD/JPY: The Yen’s Awakening and What Rising Japanese Bond Yields Mean for Markets (May 21, 2026)

USD/JPY: The Yen’s Awakening and What Rising Japanese Bond Yields Mean for Markets (May 21, 2026)

by David Coulling Comment Closed
USD/JPY: The Yen’s Awakening and What Rising Japanese Bond Yields Mean for Markets (May 21, 2026) The Japanese yen has captured global attention once again. As of May 21, 2026, USD/JPY trades around 158.80–159.20, hovering near levels that have repeatedly tested the patience of Japanese authorities. After years of ultra-loose policy, Japan’s bond market is sending a clear signal: the era of negligible yields is over. The 10-year Japanese Government Bond (JGB) yield sits near 2.77%, its highest in nearly three decades. This shift carries profound implications for the iconic yen carry trade, global risk assets, and the Bank of Japan’s (BOJ) next moves. “There is truth in bonds,” as the saying goes — and right now, the bonds are telling a story of normalisation, inflation pressures, and potential volatility spillover. Why Japanese Yields Are Rising Japan’s bond rout reflects multiple forces converging: Persistent inflation and energy shocks — Geopolitical tensions (particularly around oil) have pushed energy prices higher, feeding into Japan’s import-dependent economy. ...
Read More