At Any Rate Global FX: FX in the political crosshairs
Jan 16, 2026
Patrick Locke, a U.S.-based J.P. Morgan analyst, and Junya Tanase, a Tokyo-based expert on Asian FX, share key insights into the currency markets amid rising political tensions. They dissect impacts of Fed independence anxiety on the dollar and the recent surprise snap election in Japan. Patrick explores client sentiments around Powell’s challenges, while Junya reveals how election outcomes could trigger equity buying and yen fluctuations. They also discuss FX intervention effectiveness and shifting dynamics affecting the yen and CNY forecasts.
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Fed Subpoena Shock Was Muted By Strong Rebuttal
- The DOJ subpoena on Fed Chair Powell created significant political shock but markets reacted modestly due to a strong Fed rebuttal and political counterpressure.
- Patrick Locke suggests this episode highlights persistent Fed-independence risk that warrants a dollar risk premium over time.
Dollar Faces Downside Asymmetry
- US policy currently offers asymmetric downside risk for the dollar with more channels for dollar weakness than strength.
- Patrick Locke warns that upcoming events like Lisa Cook's hearings can trigger outsized dollar downside if markets are surprised.
Watch IEPA Outcome And Refund Risk
- Monitor the IEPA case outcome and potential refunds because $135bn in tariffs could materially affect US fiscal deficits and the dollar.
- Prepare for limited immediate dollar reaction if the IEPA is struck down but watch refund risk for longer-term dollar pressure.