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Mar 18 - 06:55 PM

Morgan Stanley: "Buy the Fact" Sentiment Ahead of BoJ Meeting

By eFXdata  —  Mar 18 - 03:00 PM

Synopsis: Morgan Stanley notes a unique USD/JPY market response to reports indicating the Bank of Japan's (BoJ) likely exit from negative interest rate policy (NIRP) at its March meeting. Initially, the yen strengthened across the board following the media report, but this momentum was short-lived, with the yen quickly reverting to broad weakness. This price action is interpreted as a "buy the fact" scenario for USD/JPY, suggesting that the market has largely priced in the anticipated BoJ rate hike.

Key Points:

  • Initial JPY Strength: Following a media report about the BoJ's possible NIRP exit, the yen initially strengthened.
  • Quick Reversal to JPY Weakness: The initial yen strength was swiftly reversed, leading to widespread weakening against other currencies.
  • Market Sentiment: The USD/JPY's price action indicates a "buy the fact" approach, with a consensus view that a BoJ rate hike in March is almost certain.

Conclusion:

The market's reaction to the anticipated BoJ policy shift highlights a consensus expectation of a rate hike, with USD/JPY movements reflecting a "buy the fact" sentiment. This suggests that traders may be looking beyond the BoJ's decision, considering it almost a foregone conclusion. Morgan Stanley's analysis points to a nuanced understanding of market dynamics and expectations leading up to crucial central bank decisions.

Source:
Morgan Stanley Research/Market Commentary

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