Bank of America Global Research discusses its expectations for this week's BoJ policy meeting.
"We expect the Bank of Japan to keep all key targets, as well as its rates forward guidance, unchanged at its upcoming policy board meeting on Thursday, 21 July. A hold is also expected by all 47 analysts surveyed by Bloomberg. The board is also likely to leave intact the +25bp ceiling for the 10-year yield under yield curve control (YCC) and reiterate its pledge to conduct unlimited fixed-rate bond-buying operations every business day to defend YCC," BofA notes.
"Heading into the BoJ MPM this week, the market has been positioned for a hawkish surprise as the options market shows demand for USD/JPY's downside.While our FX and rates sentiment survey puts long yen below short JPY duration as the best trade for the BoJ's hawkish pivot, discussion with our clients suggests some investors prefer to use USD/JPY to express their BoJ view due to better liquidity and the level. As the BoJ is likely to stay on hold and carry a dovish tone, we think USD/JPY can nudge higher. We are positioned for USD/JPY's upside via RKO," BofA adds.
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