Credit Agricole CIB FX Strategy Research notes that over the past year, every week that the BoJ and FOMC have had meetings in the same week, the JPY has strengthened.
However, CACIB argues that as the market is already priced for a ‘dovish hike’ from the FOMC, this reduces the risk of a repeat of history and could lead to a relief rally in USD/JPY post the FOMC meeting (see here).
Nonetheless, CACIB also notes that there are reports that the BoJ is considering changing its communications to acknowledge that it is thinking about how to handle a future exit from monetary stimulus, without giving the impression that this is on the agenda anytime soon.
“Our economists think that this week’s BoJ monetary policy meeting is not likely the right place for outlining an exit strategy, however, and that meetings in October or December, when the BoJ issues it’s Outlook Report, would be the more likely forum for such an announcement,” CACIB adds.
Source: Credit Agricole CIB Research
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