UBS raises USD/JPY forecasts on oil prices and BoJ caution - Investing.com UK

What the desk is arguing

The desk sees UBS's raised forecasts for USD/JPY, particularly against a backdrop of resilient oil prices and muted action from the Bank of Japan, as a significant indicator of potential trends in the market. The perception of increased inflationary pressures due to oil could prompt the BoJ to reconsider its stance, thus supporting a stronger JPY against the dollar in the coming months.

Moreover, our internal targets indicate that, while the consensus expects the pair to taper down towards 147.5 by the end of 2026, firms like JPMorgan anticipate a more robust trajectory, positing targets as high as 164. This suggests that a significant portion of the market may still harbor bullish convictions contrary to the median consensus outlook.

Where it sits in our coverage

The current consensus target for USD/JPY stands at 147.5 by December 2026, with a spread ranging from 150.0 to 157.0. This consolidation indicates some degree of uncertainty among market participants regarding the sustainability of current exchange levels. However, UBS's upward adjustments showcase an optimistic perspective that diverges from the more conservative expectations held by the majority.

Specific firms are expressing notable forecasts, including: - JPMorgan: Dec-26 target of 164.0 - Goldman: Dec-26 target of 148.0 - Mitsubishi UFJ Financial Group (MUFG): Dec-26 target of 146.0

How other firms see it

While UBS's revised forecasts paint an optimistic picture, other firms remain more cautious. Goldman and MUFG have chosen to hold their projections closer to traditional benchmarks, highlighting the differing outlooks in the market.

• Goldman: Closer alignment to the market with a Dec-26 target of 148.0.
• Morgan Stanley: A more bearish view with a target of 140.0 by Dec-26.

Some firms remain firmly entrenched in their expectations, leading to a diverse range of projections.