Focus of the day
"FX markets are becalmed. The FOMC policy debate is evolving very slowly as the members are unsure about when to start raising rates. The oil price collapse has also turned into something that looks like range-trading. European data are pointing to stronger growth, but the euro isn’t getting a lift.
We are staying bullish dollar medium-term, in the expectation that it doesn’t run out of control because market pricing of Fed hikes remains very gradual. For now, the yen is a loser and anything with yield is a winner.
...A gentle upward trend to shorter-dated US yields should not upset risk sentiment much, and should send the USD/JPY higher. If we do get enough upside surprises in US data to get 2-Year yields back above 75bp without triggering an equity selloff, it could drive USD/JPY through the December highs."