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The Week Ahead – Is BoJ laying groundwork for tightening?

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EURUSD gains over assertive ECB

EURUSD

As the ECB attempts to curb persistent inflation, the euro is rising. Luis de Guindos, Vice President of the ECB, stated that the central bank may continue to hike rates at the same pace for a while. This tone of hawkishness would help the single currency, at a time where the market thinks that the US Fed is close to reaching its terminal rate. A narrowing rate differential between both sides of the Atlantic could fuel the euro’s recovery. Though Italy’s vitriol against the QT is a reminder of the fragmentation risk as debt service ballooned in peripheral nations. The pair is testing June’s high of 1.0800 And 1.0450 This is the first support.

USDJPY declines due to hawkish BoJ hopes

USDJPY

After the Bank of Japan made an unexpected change to its yield curve control policy, the Japanese yen responded. Although it did not label it as a technical adjustment, the central bank offered traders hope that there would be a normalization process next year. The strong volatility has led to the liquidation of crowded short-yen positions. This would be a prerequisite for the currency’s comeback next year, which may coincide with the…



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