- “Looking at the FX options market, USD/JPY remains the stand-out interest. One-week implied volatility remains at a very high 20% and volatility for the Bank of Japan (BoJ) meeting next Wednesday is priced as high as 40% or a near 1.7% move in spot USD/JPY. As events showed yesterday with the 2% USD/JPY fall, even at these levels the FX options market may still be under-pricing volatility. This huge interest in USD/JPY is understandable,” ING notes.
- “The BoJ may be on the verge of its biggest policy change in decades. Even short-dated JPY Interest Rate Swaps have started to move and are at the highest levels (near 30bp) since 2008! We suspect few will want to stand in the way of the USD/JPY downside,” ING adds.
Bank of Japan governor Kuroda will be holding his regular press conference after the BOJ statement on Wednesday.
- There is no set time for the BOJ statement on Wednesday, you can expect it most likely in the 0230 to 0330 GMT (2130 to 2230 US Eastern Time) time window. I’m leaning towards that later time, or even past it given there will be plenty to discuss at this meeting.
- Kuroda’s presser begins from 0600 GMT (0100 US ET)