QCP: Yen appreciation, strong employment, and energy shocks intertwine, testing the Fed's policy path for the year.

BlockBeats news, September 10th, QCP released its September 10th macro theme report stating that the Japanese yen recently rose rapidly from around 160 to around 154, mainly driven by the Bank of Japan's monetary policy normalization, unwinding of carry trades, and a weaker US dollar. Japan's foreign exchange reserves fell by $87.8 billion in August, of which securities holdings decreased by $87.8 billion, possibly related to funding arrangements for yen intervention, and the market needs to be alert to the risk of further intervention.

On inflation, QCP believes that the surge in PCE inflation this spring was mainly driven by energy prices. From February to May, nondurable goods contributed about 0.85 percentage points to the year-on-year increase in core PCE, while energy alone contributed about 0.89 percentage points; as of July, the energy contribution had fallen to 0.48 percentage points. However, core PCE remains at 3.3%, meaning that the decline in energy prices has not yet fully eased the Federal Reserve's concerns about broad inflationary pressures.

The labor market remains resilient. US nonfarm payrolls increased by 162,000 in August, far exceeding market expectations, while employment data for June and July were revised down by a combined 55,000; the average increase over the past three months was about 71,000. QCP believes that the labor market has not yet shown obvious signs of stalling, and the "soft landing" trade still has support, but household financing costs remain elevated.

At the same time, shipping through the Strait of Hormuz is restricted, and the US Strategic Petroleum Reserve (SPR) stands at only about 286.6 million barrels, a historically low level, meaning that the inflation risk brought by energy supply shocks is still difficult to dispel. Recently, Brent crude oil has once again risen above $100 per barrel.

QCP raises a key question: if employment continues to remain resilient while inflation is mainly driven by energy, can the Federal Reserve maintain inaction within the year? If core inflation remains stubborn, expectations for tighter policy may heat up again.