If there’s one thing we’ve learned from the FOMC over the past 7 years, it’s that they care more about equity prices than anything else. Anything.
So, it makes sense to question whether they’d risk it all by raising interest rates 1/8-1/4%.
The BoJ didn’t help matters by punting on an QQE expansion earlier this week — leaving the yen carry trade in limbo at the moment. Knowing what’s at stake should it unwind, this leaves the Fed somewhat more likely, IMO, to hazard a small hike.
This is counter to everything I’ve been expecting for months, and completely contrary to the original intent of our USDJPY analog. But, obviously last month’s dive to almost the .886 Fib was neither deep nor persistent enough to induce Abe/Kuroda to endure even more ridicule (if that’s even possible.) Maybe they need a little more convincing?
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