Short-Covering To Allow USD/JPY To Reach 108 Into BoJ Meeting – BNPP

With rates markets pricing just 10% chance of a rate hike in September now, we would expect some upward pressure on Fed expectations as we approach the July meeting which could provide some temporary further support for the USD and pressure on the risk environment.

In the event, the July 27 meeting is probably too soon to expect a hawkish signal from the Fed given continued uncertainties on the domestic and global outlooks.

While short covering should allow USDJPY to reach 108 as the BOJ’s end-of-month policy meeting approaches, we remain sceptical on prospects for a broader USD recovery.

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