BOJ Fails to Support Yen in Hawkish Central Bank Week: Market Analysis
Speakers
Adam Linton
— Markets Live Strategist, Bloomberg
Summary
Adam Linton reviewed central bank themes after a hawkish FOMC and BOE, with the BOJ failing to support the yen. He argued dollar-yen is biased higher, UK curve flattening has more room to run, and stretched ECB hike pricing could leave the euro vulnerable if flash PMIs weaken.
- Central bank week was dominated by hawkish FOMC and BOE messaging and a BOJ hike that was largely priced.
- Adam Linton said the BOJ move was not enough to support the yen, and near-term dollar-yen is biased higher.
- He noted the steepness of Japan's yield curve is a concern for Japanese assets and the yen.
- He argued the UK curve has more scope to flatten because it is steeper than peers and BOE hike expectations are firm.
- He said the market's pricing of another three ECB hikes by April looks stretched.
- He flagged next week's flash PMIs as a potential catalyst for ECB repricing and the euro.
- He said Fed hike bets are likely sticky unless data change materially.
Ideas
Dollar-yen biased higher, yen weak.
The BOJ hike was largely priced and the hawkish FOMC has raised the bar for dollar-yen downside, while the steepness of the Japanese yield curve is a negative for Japanese assets and the yen. Near term, dollar-yen looks biased higher because the BOJ has not done enough to support the yen and intervention/repatriation flows are not immediately offsetting that.
UK curve flattening has more scope.
The BOE's hawkish messaging has made a November hike more likely, and the market has confidence the BOE will deliver. The UK curve is significantly steeper than peers and the recent flattening has sticking power, so the UK curve has more scope to reprice through further flattening, even though long-dated gilts remain exposed to the budget and energy.
Euro vulnerable as ECB hike bets stretch.
The market is pricing another three ECB hikes by April, which looks stretched given the ECB is already at the upper end of neutral and there has been no catalyst to justify that pricing. If next week's flash PMIs roll over and show weakness like the French PMIs, that could turn ECB pricing and weaken the euro.
Up Next
This Bloomberg Markets video, published September 18, 2026, features Adam Linton discussing USD/JPY, UK yield curve flattener, EUR/USD. 3 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Adam Linton · Tickers: USD/JPY, UK yield curve flattener, EUR/USD