USD/JPY has pushed through 120 today. Fed's tough love on inflation could send the pair to 125, economists at ING report.

Search for terminal Fed rate continues

“Hawkish comments from Fed Chair Jerome Powell yesterday have injected another wave of re-pricing into US rates markets. Expect much speculation over whether a flat or inverted US yield curve means recession – and certainly, this energy shock has increased the chances of a late 2023/24 US recession.”

“A sharply deteriorating trade position on the back of fossil fuel prices and a still dovish central bank leaves the door wide open for USD/JPY to trade up to 125 over coming weeks.”