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The yen's weakness is going crazy! New highs on USDJPY are the order of the day. The pair has now risen on 13 consecutive sessions, the longest since the 1970s!  The ADX, a measure of trend strength, is now at its highest level since 1974. Reasons behind the weak performance: 1) slowdown in global growth is reducing the appeal of the yen, and 2) higher US yields are boosting the US dollar.  

Rising US yields are continuing to pressure the Japanese currency. This morning BoJ Kuroda's dovish comment has left the yen powerless, with USDJPY now above the 125 level, and nearly at the highest level since 2002. Technical analysis shows no other major resistance until the 134 level. How far can the pair go now?    

Markets are witnessing challenging times in early 2022, as the risk of rising interest rates from major central banks has reached elevated levels. Wall Street analysts also for once seem not to agree on the outlook; while some believe markets have already priced in future likely central bank hikes, others are more cautious and point to possible weaker-than-expected demand which could negatively impact companies bottom lines. The good news is that opportunities arise when there's fear in the markets. Given the recent strong earnings reports, strong labor market, and still favourable financing conditions, It's very likely that stocks keep producing better returns than bonds. In fact, the equity risk premium in Europe (Stoxx600 earning yield minus the 10-year bund yield) is reaching very attractive levels, compared to both its past and US equities.  

As the economy recovers, tight job markets and persistent inflation has pushed central banks from many countries to start considering rising interest rates to prevent an inflation spiral. Following the Fed's meeting on Wednesday, markets are expecting now 4 and 5 rate hikes from BoE and the Fed respectively in 2022. However, the longer dated bond, which are used as proxy for growth by market participants, are lagging behind, showcasing investors concern over too much tightening from the central bankers. 

Britain's inflation surprised investors this morning, as data shows it surged to 5.4%, the highest since 1992. Consumer prices are seeing an increase across the board from food, restaurant meals, to furniture prices. It's causing a weakening of household spending and adding pressure for policymakers to act. Investors will be watching closely the Bank of England's next meeting on 3rd February for clues if it considers another interest rate hike, following 15 basis points increase to 0.25% in last December. Similarly, UK households could be facing soaring energy bills, possibly 75% above today's price, as the national energy crisis sees no end in sight. The FTSE 100 is unchanged today and up 0.8% year to date, versus Europe's Stoxx 50 which is down 1.6% ytd.