2025 Market Outlook: Key January Events to Watch 
RBA Raises Interest Rates to 4.35% Amid Rising Inflation Risks and Middle East Tensions 
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms 
Fed’s Goolsbee Warns Inflation Remains Elevated, Signals Caution on Rate Cuts 
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
Paraguay Holds Interest Rate at 5.5% as Inflation Remains Stable Amid Global Uncertainty 
South Korea Central Bank Signals Inflation Concerns as Oil Prices Surge 
OECD Sees Bank of Japan Raising Interest Rates to 2% by 2027 
DOJ Ends Probe Into Fed Chair Jerome Powell, Boosting Kevin Warsh Confirmation Prospects 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
South Korea Central Bank Signals Cautious Policy Amid Inflation and Middle East Tensions 
ECB Signals Possible Interest Rate Move if Inflation Outlook Fails to Improve 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
Today, the Bank of Japan (BoJ) confirmed last week’s rumours and tweaked by announcing a shift to the range of assets it would buy as the form of its yield curve control strategy and introduces extensive "forward guidance" committing to low rates for a prolonged period of time. It would now allow larger volatility of the 10y yield around its 0% target, while it still plans to counteract excessively rapid increases in the yields. However, the market reaction to last week’s media reports probably showed the central bankers that this adjustment left alone would result in an appreciation of the yen.
USDJPY tend to plunge during summer vacation season ("Obon" in the Japanese language which is in mid-August). Such seasonality is not strong, but USDJPY now has a tendency to decline for the first 10 days of August. Especially in the past 5 years since Abenomics started, the pair dropped during the first 10 days of August four times out of five.
Off spot reference: 111.51, buy a 1M 110.25/109 put spread for 36 bps net premium indicatively (vols 7.4/7.6 vs 8.05 choice).
The maximum payout is 115bp, max payout/cost ratio is 3.2, and the put spread is 53% discounted to a standalone 1M 110.25 USD put/JPY call.
The rationale for the put spread structure is two-fold:
a) It takes advantage of the recent widening of short-dated risk reversals in favour of JPY calls to reasonably stretched levels adjusted for the level of ATM vol (refer above chart).
USDJPY 1M 25D risk-reversals currently imply a spot-vol correlation level of around -38%4, which is not a historically high bar for realized spot-vol correlation to beat but is nonetheless expensive vis-à-vis recent delivered numbers (2-wk +25%, 1m +10%) and supportive of skew selling option structures such as put spreads; and
b) The extent of any potential yen strength from here is likely to be capped in the fundamental view, specifically after the knee-jerk decline in USDJPY spot late last week. Courtesy: JPM
Currency Strength Index: FxWirePro's hourly JPY spot index is flashing at -111 levels (which is bearish), while hourly USD spot index was at -109 (bearish) while articulating at (12:52 GMT). For more details on the index, please refer below weblink:
