USD/JPY, GBP/USD flows: Supply, expiries cap USD/JPY back; focus turns to BoE MPC

Consolidation of the initial Fed dollar pop overnight, better 156+ supply on USD/JPY capping the pair back into the mid 155s ahead of the key BoJ on Friday, with a fraction of JGB curve flattening into that after the Fed.

A large volume of expiries peppers the next couple of days on USD/JPY which could add to the event swings, today across 156.75-155 ignoring well out of the money, but more importantly a very large $4.7bn at 155 tomorrow. The latter could also be adding to the pullback weight.

 Today the focus shifts very much to the BoE, where rates policy is expected to remain unchanged, though with some focus on the vote and the commentary. The MPC stands out even more as the laggard in terms of additional tightening coming out of the Fed and the ECB last week, pressing cable back to the next support band down at 1.3350/45 congestion and 61.8% Fib. Below here stronger support at the 1.3300/1.3273 congestion and late-July low. The Bank is also due to have its annual vote on QT and is expected to reduce the pace, halting purchases of 20-30yr gilts. 

For the BoE, the November meeting, the next Quarterly Report month, may be the pivotal one in terms of its strategic assessment of whether it can hard stick with its current ‘afford to wait while no underlying inflation pressure’ stance, as the labour market softens.