USD/JPY to reach 115 by year-end - Lloyds Bank

Analysts from Lloyds Bank expect more stimulus form the Bank of Japan in the coming weeks and anticipate USD/JPY  will rally back above 110.00.

Key Quotes:

“USD/JPY has tested both extremes of its 105 – 112 range recently. Through May, it rallied from below 106 to a high above 111. However, PM Abe’s decision to delay the second instalment of the increase to the Japanese consumption tax, combined with the disappointing US payrolls report and subsequent dovish comments from Fed officials, prompted USD/JPY to decline back towards it range lows near 105.”

“The outlook for the Japanese economy is still subdued. Despite Q1 GDP growth being revised higher (from an annualised 1.7% to 1.9%), inflation remains a key concern – core inflation (which excludes food and energy prices) underperformed the market’s consensus forecast. Machine orders were also significantly worse than expected. Furthermore, given the anchored nature of medium-term inflation expectations, underlying structural weaknesses in the domestic economy and persistent JPY strength, there is a growing likelihood of further easing from the BoJ – we believe that additional stimulus may be announced in the coming weeks. As such, we anticipate USD/JPY rallying back above 110, and reaching 115 by year-end.”