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Over the next five meetings, markets expect the Fed-ECB policy spread to be in favour of the latter by 42bps. This follows traders pricing around 100bps of rate cuts by the ECB this year, leaving the main deposit rate at around 1.90%.
This isn't the largest differential read in our interest probability tracker, the ECB-BoJ spread is almost twice as the Fed-ECB, the latest pricing reads at 90bps in favour of the BoJ over the next five meetings
Keeping the BoJ pricing in mind, it makes sense to see the G10FX underperform the yen over the last couple of sessions, not to mention the risk off tone
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