The FX Trader BoJ disappoints JPY bulls

Key arguments

• The BoJ hiked rates by 25bp but the 7-2 split vote and a statement with little urgency prompted JPY selling across the board.
• Ueda's meeting-by-meeting guidance preserves optionality and lacked a rhetorical line in the sand to impress the market.
• The BoE was more dovish than expected, halting all gilt sales for six months and completely stopping long-dated gilt sales, sending the 30-year gilt yield down 12bp.
• The front-end US Treasury reaction to the FOMC was erased on an oil price sell-off, suggesting the market doubts more hawkishness to price.

Corresponding source evidence

1. Summary: The Bank of Japan hiked rates and guided for more in its monetary policy statement, but a split decision punched the JPY lower.
2. Elsewhere, the BoE was somewhat more dovish than expected and overhauled its QT programme, pushing sterling a bit lower.
3. There may have been some additional pent-up energy in the USDJPY reaction from the USD rally after the FOMC meeting, ironically even as US short-dated yields backed out much of the reaction to the meeting by late Thursday, in part as oil prices continued to retreat.