JPY: Any surprises, Mr. Ueda?
A packed agenda of central bank speakers in Sintra today includes Bank of Japan Governor Kazuo Ueda, who will join the policy panel with Lagarde, Powell and Bailey. The speech will come at a time when the market’s focus on the yen is on the rise again: USD/JPY traded above 144.00 yesterday, and is rapidly approaching the 145 area which is seen as a potential line in the sand for FX intervention by Japanese authorities.
Overnight, Japan’s top currency official, Masato Kanda, stepped in with a verbal “protest”, saying that authorities are ready to intervene if there are excessive FX moves, but USD/JPY is facing fresh upward pressure this morning and today, hawkish comments by Powell, backed by the solid US data seen so far this week, could easily take the pair closer to 145.00.
There is a possibility that Ueda will use Sintra as a stage to try and offer some verbal support to the yen, although the sustainability of that as a supporting narrative for the yen is up for debate. Any hawkish tilt in Ueda’s resolutely loose policy stance would surely have a more far-reaching impact on the currency: we do not exclude that this could happen at the July BoJ meeting, but is Ueda ready to tweak his narrative today? The probability is arguably pretty low, but with very little priced in, the bar for any hawkish surprise is also quite low.
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