BOJ rhetoric on hold has Yen looking interesting
Been watching the JPY pairs lately, and frankly, the BOJ's continued insistence on maintaining ultra-loose policy is starting to feel a bit like whistling past a graveyard. Every other major central bank is either hiking or at least talking tough, yet Kuroda and co. are still preaching the gospel of negative rates.
Now, I'm not calling for an immediate reversal, but the divergence is becoming increasingly stark. If the Fed continues with its hawkish tone and even the ECB gets more assertive, the pressure on the JPY is only going to mount. I'm keeping a close eye on $USDJPY for any signs of a capitulation, but also looking at the crosses. The carry trade might be getting a bit crowded, but the underlying fundamentals for a weaker yen against most majors are still there, even if $USDX is a bit flat today around 25.48. I'm not seeing any immediate breakouts in $USDMXN at 17.1988 or $CADUSD at 0.71335 to divert my attention either.
I agree the divergence is becoming increasingly stark. While they've held the line, the pressures on their policy stance, especially with inflation starting to tick up globally, are certainly building. It'll be interesting to see how long they can maintain this without a significant shift in rhetoric or action.