BoJ Due
We expect the BoJ to leave policy unchanged on Tuesday, although there has been some speculation that further easing measures will be announced. If any easing is announced, we expect it to have a marginally negative impact on JPY, past announcements have lead to a brief rally in USDJPY, which eventually fades after a few sessions. With USDJPY close to the top of its range, it will probably take a significant change in policy to change that trend. There has also been commentary that, following the Fed’s move, the BoJ may announce some sort of inflation target, or at least begin the debate on longer-term price targeting. Industrial production data is also due, after yesterdays soft GDP numbers. Following the successful Greek parliament austerity vote, Monday’s session was relatively quiet. The euro initially rallied in Europe but then fell back, trading in a fairly narrow range. Risk appetite was broadly supported though, with major equity indices trading in the black. We have revised our FX forecasts, after the removal of some of the tail risks in the Eurozone, the better macro environment and the ECB’s ongoing liquidity measures. We raise our one and three month forecasts for the euro against the dollar and yen while retaining our underlying bearish view on the single currency. We now look for EURUSD to trade at 1.30 over one month (from 1.20 before) and 1.25 over the next three months (compared to 1.15 previously). Full details are in this week’s FX Perspectives.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank