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Mar 01 - 12:55 AM

HSBC: Staying Short EUR/JPY Trade in Light of BoJ's Policy Change Signals

By eFXdata  —  Feb 29 - 04:30 PM

Synopsis:

HSBC maintains a short position on EUR/JPY, targeting a move towards 158.50, amid recent comments from Bank of Japan (BoJ) officials hinting at a potential shift in monetary policy. BoJ board member Hajime Takata's recent statements, emphasizing the visibility of the price target and the need for flexible policy adjustments, have fueled speculations of policy changes, including ending negative interest rates and the Yield Curve Control (YCC) framework. These comments follow BoJ Governor Ueda's optimistic remarks on achieving the inflation target, underscoring a growing confidence within the BoJ regarding their inflationary goals.

Key Points:

  • BoJ's Policy Shift Signals: Takata's comments suggest the BoJ is contemplating steps towards exiting its ultra-loose monetary policy, hinting at potential changes in the upcoming meetings.

  • Technical Recession and Economic Data: Despite Japan being in a technical recession and facing a significant drop in production, the focus remains on the spring wage negotiations, which could influence the BoJ's policy direction.

  • HSBC's Short EUR/JPY Position: Based on the BoJ's evolving stance on monetary policy and the potential for wage growth acceleration, HSBC recommends a short position on EUR/JPY, with a target of 158.50.

Conclusion:

HSBC's strategy to short EUR/JPY is aligned with the latest comments from the BoJ, indicating a possible policy shift that could strengthen the JPY. The anticipation of changes in the BoJ's approach, especially regarding the YCC framework and negative interest rates, coupled with the upcoming wage negotiations, presents a favorable backdrop for the JPY's appreciation against the EUR. Investors are advised to consider these developments when evaluating their positions in EUR/JPY trades.

Source:
HSBC Research/Market Commentary

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