Lee Hardman, Senior Currency Analyst, and Andrea Hayward, Vice President of the Japanese Client Sales Group for EMEA in London, discuss the fallout from a volatile week for USD/JPY.

What have been the main drivers behind the sharp correction lower for USD/JPY?

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EU parliamentary elections in June are fast approaching and the decibels of debate surrounding the Green Deal legislation are rising. Certain investors have suggested that a shift in political attention away from the Green Deal and that recent pushback and watering down of some regulation is negative for climate action in Europe.

Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), discusses this shift in focus and whether this is a reflection of a broader ESG pushback, or whether a shift in narrative mindset is warranted to ensure a successful implementation post June’s EU parliamentary elections.

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This week George Goncalves, MUFG Head of U.S. Macro Strategy, walks through what to expect at the May FOMC meeting. We believe that QT will be tapered while the Fed will start to acknowledge that real rates are too restrictive. Our base case is that Chair Powell will say tightening is working, but they are being mindful of the long and variable lags. Also, on the slightly more hawkish side, Chair Powell will likely reiterate that the FOMC lacks confidence on future inflation path and is not ready to commit to the timing on rate cuts. Lastly, George briefly highlights why we are still focused on and worried about the ongoing macro divergences in U.S. economic data and that the economy looks stronger due to fiscal policy.