Barclays trade(s) of the week: Long GBP/JPY and USD/JPY

Trade for the week ahead: Long GBP and USD versus Barclays says to:
take advantage of potential divergence of the monetary policy outlook between the Bank of England/Fed’s Federal Open Market Committee and the BOJ
More from the note:
Key US economic data and the next Fed Chair remain the most important factors in assessing Fed policy outlook for 2018
Powell’s policy stance appears similar to Yellen’s

  • Taylor, either as chair or vice chair, could tilt the reaction function to the hawkish side

We expect no material changes from the FOMC

  • We expect the BoE to deliver a 25bp rate hike and dispel expectations of a one-and-done hike — we expect GBP to appreciate as a result
  • We expect unchanged policy by the Bank of Japan, which will to keep the yen soft

The durability and extent of the ongoing USD rebound will also depend on the tax policy outlook. Failure to deliver would return the USD to its medium-term weakening trend, particularly versus high carry EM and some G10 currencies. On the contrary, tax cuts would imply only modest USD gains. while a tax reform would drive a significant boost to the USD. likely retesting its January highs.
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