📝 Expect EUR/JPY to Keep Pushing Towards 150.0: SEB Strategy

Erring on the side of caution, BOJ will likely delay policy normalization as long as possible, in our view. In light of the continued improvement in underlying inflation, we still expect BOJ to adjust policy stance by Q3, possibly in July.

With the BOJ now out of the way, the fate of the yen will depend on relative monetary policy with the ECB out-hawking major central banks. If the Fed manages to convince the market to shave off some of the rate cut expectations in late-2023, USD/JPY may strengthen. Even so, the Fed is near the end of its own tightening cycle, limiting upside gains to 10y UST yields. Meanwhile, policy divergence is most evident with the European Central Bank (ECB). Already, EUR/JPY blasted through 148 after the policy announcement. We expect the ECB to deliver at least 25bps hike in May with indications of another hike in June. This will likely push up the pair towards 150 on ECB hawkishness. - SEB Strategy