USD/JPY has fallen back below the 150.00 level. Economists at MUFG Bank analyze the pair’s outlook.
The Fed will end up cutting rates more than they are currently planning
We continue to believe that the BoJ’s imminent policy shift away from loose policy settings will help to provide more support for the deeply undervalued Yen. However, it will also require the Fed to begin lowering rates to narrow the policy divergence with the BoJ.
We still believe that the Fed will end up cutting rates more than they are currently planning but the recent run of stronger US economic activity and inflation data at the start of this year is currently challenging our view.
Our outlook for USD/JPY to fall back below the 140.00 level later this year is built on the assumption that growth in the US will moderate in response to higher rates and inflation will continue to slow back towards the Fed’s goal.
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