What else is there other than BoJ focus? - Nomura
Analysts at Nomura explained that while BOJ communication is attracting interest in the FX market, there are also a number of potentially important changes in the external environment for JPY.
"North Korea conducted another missile test for the first time since mid-September. JPY tends to outperform after North Korean provocation, and it rose initially again. However, the market reaction tends to be larger in response to nuclear tests, while missile launches tend to have less impact.
Our North Korea stress index is still low and JPY appreciation this time has been limited. North Korea has declared it has completed its state nuclear force and is now capable of to reaching the US, and there may be limited further provocation from here, which may reduce uncertainty about the North Korean situation in the near term. The UK is reported to have reached an agreement with the EU on the divorce bill (Telegraph, unconfirmed), which supported GBP overnight. Recently, the increased Brexit stress has tended to weaken GBP against CHF and JPY, and if the agreement on the divorce bill is confirmed, JPY may underperform among G10 FX.
In the near term, the OPEC meeting on Thursday and the US Senate tax reform vote, which could take place as early as Thursday, represent important external event risks for JPY. FX market reaction to oil prices tends to be small if the implied volatility of oil prices is low.
Disappointment from OPEC could put upside pressure on JPY, but the impact should be short-lived. USD/JPY reacted positively to the Senate budget committee decision on Tuesday but further upside is likely if the Senate passes the tax reform bill."