10 Jul 2013
Flash: JPY Risks - BMO
FXstreet.com (London) - Stephen Gallo, European Head of FX Stratergy at BMO said the JPY will remain sensitive.
He said it will remain sensitive to both equity prices, “risk-on/risk-off” and yields through today’s Fed event risk. He suggests looking for signs that both equities and yields are rising in tandem before thinking about getting short of the JPY in size.
He thinks clues suggesting that the Fed remain concerned about market volatility or that tapering will start later than September will force expectations for the first Fed rate hike to be pushed back, making the USD a “sell”, however he expects such weakness to be rather limited. “If anything though, we’d prefer to adopt the angle that recent jawboning and rate anchoring by European central banks suggest that the Fed will remain rather firm in its commitment to start scaling back the size of its QE programme sooner rather than later, and therefore aim to drop hints about the next set of hurdles: the “how” and the “how much””.
He said it will remain sensitive to both equity prices, “risk-on/risk-off” and yields through today’s Fed event risk. He suggests looking for signs that both equities and yields are rising in tandem before thinking about getting short of the JPY in size.
He thinks clues suggesting that the Fed remain concerned about market volatility or that tapering will start later than September will force expectations for the first Fed rate hike to be pushed back, making the USD a “sell”, however he expects such weakness to be rather limited. “If anything though, we’d prefer to adopt the angle that recent jawboning and rate anchoring by European central banks suggest that the Fed will remain rather firm in its commitment to start scaling back the size of its QE programme sooner rather than later, and therefore aim to drop hints about the next set of hurdles: the “how” and the “how much””.