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JPY Bumped Higher as Reports See BoJ NIRP in the Balance at March Meeting

FOREX
  • JPY price action has been front-and-centre for markets across Wednesday morning, with a series of exclusive reports from MNI and Jiji further raising speculation of an exit from negative interest rate policy as soon as the March meeting. The headlines were met with JPY strength, which pressed USD/JPY to new pullback lows at 149.33 before stabilising.
  • Two-week JPY vols, now capturing the outcome of the March 19th BoJ decision, are further bid, adding to yesterday's rally to touch 9.3 points and the highest level since early February. This tips 2w vols above the YTD average, but still just shy of the 12m rolling 2w vol. OIS markets now price a ~50% chance of a 10bp March hike (vs. 30% yesterday), with a BoJ exit from NIRP now fully priced through the end of the June meeting (vs. 90% prior).
  • GBP sits mid-table in G10 ahead of the Spring Budget from the UK Chancellor later today. The Chancellor faces the task of rejuvenating an economy with limited fiscal headroom - a cut to National Insurance rates is expected to headline, with space seen too tight for any steps on income tax. GBP/USD is on the front-foot thanks to broad USD weakness headed into the crossover, however the pair has failed to make headway through the 1.2735 weekly high.
  • Focus for the remainder of the Wednesday session turns to the ADP employment change release and JOLTS Job Openings data for January - ahead of the Bank of Canada rate decision - at which no change in headline policy is expected.
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