USD/JPY is edging higher in early Europe as Japan's largest labour union, Rengo, agreed a 5.46% wage increase for the coming year - perhaps a little lower than early speculation of 6%, ING's FX analyst Chris Turner notes.
Difficult for USD/JPY to sustain a recovery over 150 near term
"However, today's agreement keeps the virtuous cycle of higher wages, higher consumption and higher prices in play and suggests the market is very much under-pricing the risk of a Bank of Japan rate hike in May. A 25bp hike is priced with only a 14% probability, whereas a hike in May is ING's house call."
"We certainly see yen outperformance on the crosses over coming months, led by tariff unrest in April and a BoJ rate hike in May. And unless we see some strong bounce back in US data, it will be difficult for USD/JPY to sustain a recovery over 150 near term."
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