Talking Points:
• BoJ Governor Kuroda remarked after the bank's hold on policy that he doesn't see need for an upgrade
• Global monetary policy is not measured by the groups approaching a hike, but rather those pulling back from QE
• There is significant premium of more BoJ QE built into the Dollar and global stimulus in general risk trends
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What happens when one of the most dovish major central banks starts ease the tap? The Bank of Japan held its policy bearings at its meeting Wednesday while its Governor remarked that he saw little reason to further expand the already sizable open-ended quantitative easing effort already in place. That is still an expansive program, but the market has moved to price in more. Looking back over the past three years, USDJPY and the Yen crosses have marked most of their incredible progress leading up to fresh stimulus and in the aftermath. In the barren periods between, the market has been flat. The Yen crosses are potentially pricing in further escalation, which poses a risk to the currency should they not deliver. But, more systemically, the implications of the most 'dovish' central banks setting a ceiling on support for investors changes the trend of what may be reckless optimism. We discuss the growing imbalance in today's Strategy Video.
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