Comments via Citi on the US dollar and also yen ahead of the BOJ and FOMC meetings this week. And mixing in US-China tensions.
- A further correction in risky assets may exacerbate the move lower in USD/JPY near term. Besides, the BoJ has remained fairly resilient in 2019 on their forward policy guidance despite the G10 central bank dovish pivot since January. A lack of additional BoJ easing is also a JPY positive.
- Citi's base case is for a more favorable outcome on trade than the market expects, along with US activity data holding up, the Fed may take the opportunity to talk down the probability of near-term cuts being priced-in. Consequently we are maintaining our base case for no cuts in 2019. If US-China trade tension shows sign of resolve and market risk recedes, funds may flow out of safe-haven JPY.
