Bank of Japan unfazed by yen weakness

Giles Coghlan LLB, Lth, MA Financial Source

The one notable mover in October has been significant JPY weakness. This has been very marked. See below for the monthly snapshot on JPY weakness.

So, the one question that was crucial was, ‘Is the BoJ worried about this?’ The answer is ‘no, not at all. The BoJ is quite happy to see more JPY weakness. BoJ’s Governor Kuroda said:

JPY moving within the range of current fundamentals,
The yen has weakened a ‘small amount’.

With this major concern out of the way, the rest of the meeting was entirely unspectacular. The BoJ maintained policy settings with rates kept at -0.10% and the 10-year JGB yield target kept at around 0% as expected. Revisions were both made lower for core CPI and GDP. Core CPI was down to 0.0% vs 0.6% expected and GDP growth was down as well to 3.4% vs 3.8% previous. Consumer inflation was expected to rise, as even deflationary Japan shows vulnerability to inflation. The 2022 forecast for inflation is 0.9% and 1.0% for 2023.

The takeaway

No inflation worries for the BoJ. No fears over the weak JPY. This means the JPY can remain a funding currency and is a great currency to pair with currencies set to raise rates. Dips in the NZDJPY remain medium-term buys and the BoJ meeting has done nothing to change that.

You can also note the strong seasonals that are ahead for NZDJPY as outlined below.

Learn more about HYCM

Author

Giles Coghlan LLB, Lth, MA

Financial Source

Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold clings to gains just above $5,000/oz

Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The precious metal’s move higher is also underpinned by the slight pullback in the US Dollar and declining US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest

Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.