UK FISCAL: Ten big picture takeaways from the Budget (3/3)

• We see hawkish risks headed into the BoJ decision Thursday. A full 25bps hike is not priced until March next year, potentially tilting markets for a more aggressive pricing of faster hikes after this week's meeting.
• Assuming an unchanged decision, the focus will be on hiking risks into year-end. While only a small minority of the BoJ board (we had two dissenters looking for a 25bps hike at the Sep meeting) sees the inflation goal as having already been met, the core membership of the board isn’t at this stage yet.
• In one of our recent exclusives, we highlighted that while U.S. trade policy may weigh on the Bank of Japan’s internal assessment of underlying CPI from late this year into early 2026, policymakers do not expect it to derail its rate-hike path from the December meeting onwards. Further confidence in this path of travel could spur repricing for December, supporting JPY as a result.
• An overnight USDJPY straddle incorporates a move of +/- 110 pips from current spot levels, potentially highlighting that key resistance around 153.25 (respected on Monday) will continue to cap the topside.
• Conversely, a move lower for USDJPY might garner more momentum given the more optimistic tone provided by US/Japan officials this week and as short-term positioning is squeezed. Market participants will also be aware that the politically driven gap at the start of the month has yet to be filled, and would require a move to 147.47 for this to happen. Interim support levels to watch are 151.19 (20-day EMA) and 149.38, the Oct 17 low.

• EUR/USD: Nov04 $1.1635-40(E1.3bln)
• USD/JPY: Oct31 Y152.50($1.2bln)
• USD/CAD: Oct31 C$1.3500($1.1bln)

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