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Kit Juckes, Global Head of FX Strategy at  Societe Generale, offers the near-term outlook on GBP/JPY, with short positions recommended.

Key Quotes:

“We are sticking with GBP/JPY shorts, though the yen is a little weaker this morning. The correlation between yen and the Japanese curve is something we are watching, but does a steeper and higher curve really undermine the currency?

And is the BOJ really considering driving short rates much further below zero and causing more pain on the banking sector? In a country where the other side of the BOJ’s bloated balance sheet is a vast pile of excess reserves in the banking system?

Maybe the market is short enough of EUR/JPY that some position covering is to be expected, but I’m having a lot of difficulty seeing how the BOJ engineers a significant currency reversal from here.”