JPY: Benefiting from geopolitics, but with a diminishing degree - ING

Analysts at ING explain that the North Korea geopolitical tensions over the weekend has provided a boost to JPY. However, unless we see a material escalation of the situation, we don’t expect USD/JPY to break the 108.50 level this week given that the extent of headline-driven price moves seem to be diminishing, they further add.

Key Quotes

“Greater market nervousness may keep USD/JPY upside contained, while the tail risk of an escalation could easily see a move below our weekly range.”

“Trump's re-introduction of his tax reform agenda has understandably had little impact on the dollar (15% tax cut unlikely to be funded with extra fiscal revenue). Therefore the best bet of dollar support comes from Fed talk this week, somehow convincing the market that chances of a rate hike in December are above 30%. We see this as unlikely, especially as markets are well-versed in the Fed's reaction function and are accurately tracking US data outturns. Of the Fed speakers this week, it will probably be centrist Dudley's speech on monetary policy on Friday that gains most attention. Wed sees the Fed Beige Book released before the Sep 20th FOMC meeting.”