Details Cookies
United Kingdom
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

FX Update: Is FOMC priced in? BoJ risk towers above all else. FX Update: Is FOMC priced in? BoJ risk towers above all else. FX Update: Is FOMC priced in? BoJ risk towers above all else.

FX Update: Is FOMC priced in? BoJ risk towers above all else.

Forex 5 minutes to read
John Hardy

Head of FX Strategy, Saxo Bank Group

Summary:  The market watching nervously whether the FOMC meeting tonight delivers the expected 75 basis point hike, the largest since 1994, as well as if it matches expectations for the policy trajectory for this year and next in the dot plot and economic data forecasts. Elsewhere, the ECB is suddenly in emergency meeting mode to address peripheral spreads today. And towering above all other event risks this week is the Bank of Japan meeting and whether and to what degree the Bank of Japan is prepared to capitulation on its yield-curve-control policy.

FX Trading focus: Is market ready for a 75-bps hike from Fed

I was surprised to see a Twitter poll today from Newsquawk on the Fed decision tonight, which showed nearly a third of respondents believing that the Fed will only move by 50 basis points tonight despite the market forwards fully priced for 75 basis points for tonight and for the July meetings. Could it be that the market is not fully ready for the larger move? The US dollar move this week suggests that we have made a significant adjustment, but we’ll only know in the wake of the meeting. My general belief is that the Fed only wants to do what is priced into the market and won’t go for a larger 100 basis point hike, but my conviction has been lowered considerably by the sudden rush in repricing due to a big shift in inflation expectations, which are a new and possibly more intense source of concern for the Fed. Also to watch for tonight are the dot plot shifts in the forecast, with the market at 3.6% for the December meeting and near 4% for the end of next, versus a median of 2% in the March projections for the end of 2022 (!) and 2.75% for end 2023.

All JPY crosses will be critical to watch ahead of and after the Bank of Japan meeting on Friday, with an added twist for the EURJPY pair the peripheral spread situation in the EU and how the ECB moves to address it. Would a successful crushing of yield spreads prove EUR positive (lowered existential strain) or EUR negative (semi-QE for parts of Euro Zone even if the overall ECB balance sheet is not expanding and the ECB is set to raise rates)?. If the market reads this as ECB dovish for the implications for the forward rate hike potential (not what we are getting in the chatter from various ECB officials arguing for possibly larger hikes after the July move), the euro may weaken more broadly, otherwise EURJPY may simply fall more or less in line with other JPY crosses if the Bank of Japan capitulates on the YCC policy this Friday. Technically, watching the 140.00 area.

Source: Saxo Group

The ECB is holding an emergency ad hoc meeting due to “current financial conditions” after a prominent speech from ECB board member Schnabel yesterday indicating a limitless commitment to ensure that there are no “disorderly” moves in yields, particularly for peripheral EU economies. The end of QE was always going to be difficult for the ECB, but the fact that they are already out with an emergency meeting less than a week after their regularly scheduled meeting speaks to the sense of panic. The scale and speed of the sell-off in Italian BTP’s with the sharp rise in global yields is clearly behind this move – the ECB perhaps thought that it could bide its time until the fall, but the US yield curve put the pressure on right away. As noted above in the EURJPY chart commentary, it was interesting to see the market reacting with a EURCHF rally due to the improvement in the peripheral spreads, but lower spreads are only a durable positive for the euro if the ECB is able to set up a way to crush spreads that doesn’t prevent a more rapid pace of rate policy tightening in general – a somewhat incoherent policy, even if the ECB’s balance sheet is so vast that if technically speaking, it can still eventually even reduce overall holdings while shifting existing holdings to the periphery to reduce spread volatility. But to do so it would have to move even more aggressively away from old “capital key” principles linking its holdings to the relative size of each member’s economy. Depending on the last of these angles in particular, there doesn’t have to be a strong angle on the euro, provided the rate outlook stays supported.

Finally, I extensively discussed the Bank of Japan meeting risks on Friday (overnight between Thursday-Friday for those of us not in Asia), with thoughts on how to trade this in yesterday’s update, mostly in anticipation that the Bank of Japan will have to give way in some fashion, particularly on a net-hawkish FOMC meeting that takes US yields higher still. For further discussion, have a listen to this morning’s Saxo Market Call podcast. Also, the pressure has built further on the Bank of Japan as speculators are aggressively selling JGB futures, taking the implied yield on these to well above the 25 basis point nominal cap that the BoJ enforces on 10-year JGB yields, and with 10-year rates in 1-year marked well above 50 basis points in forward markets overnight. Beware the risks of discontinuous moves and also beware, as Steen Jakobsen suggested is a scenario for the BoJ,  that Kuroda and company might try some kind of incremental approach – moving the YCC target to 50 basis points or 100 basis points, for example. Sooner or later, the BoJ breaks.

Table: FX Board of G10 and CNH trend evolution and strength.

Risks of discontinuous moves in JPY crosses over the Friday BoJ. Otherwise, noting the broad sterling weakness as GBPUSD dipped briefly below 1.2000 at one point.

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
Chiefly watching JPY cross status over the next few sessions in terms of new developments, as well as trend check on USD pairs in the wake of tonight’s FOMC meeting.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights (all times GMT)

  • 1215 – Canada May Housing Starts
  • 1230 – US May Retail Sales
  • 1230 – US Jun. Empire Manufacturing Survey
  • 1400 – US Jun. NAHB Housing Market Index
  • 1620 – ECB's Lagarde to speak
  • 1800 – FOMC Meeting
  • 1830 – Fed Chair Powell press conference
  • 2130 – Brazil Selic Rate announcement
  • 2245 – New Zealand Q1 GDP
  • 0130 – Australia May Employment Change / Unemployment Rate


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.