Swissquote Bank Research Team
Swissquote Bank Ltd
Investors took a closer look at the US central bank's statement, confirming that rate cuts are possible solutions in order to sustain expansion. Meanwhile, the Bank of Japan monetary policy meeting did not bring anything new to the table, although Fed and ECB are shifting policy towards a dovish bias. Therefore, we should see JPY gaining traction as market uncertainties, BoJ limited room of maneuver remain key arguments.
Similarly to prior meeting in 25 April 2019, BoJ members have been voting 7 – 2 to maintain ultra-loose monetary policy, with short- and long-term interest rates -0.10% and around 0% respectively while maintaining the pledge to increase government bonds holdings by JPY 80 trillion ($742 billion) per year. The BoJ's economic assessment is unchanged, indicating that the economy is growing at a moderate pace and unlike the Cabinet Office cut from “weakening” to “worsening” two weeks ago. As the trade war is reducing Chinese demand of Japanese goods, and easing from both the ECB and the Fed would have a negative impact on the Yen and ultimately on economic growth and inflation, some analysts are expecting the BoJ to cut interest rates, even if such a reaction would have a limited impact in our view. Japanese banking sector already faces heavy margin pressures, while a further decrease in interest rates could harm the financial health of the sector. On the other hand, a stronger JPY would also become a major impediment for the Japanese exporting industry looking forward.
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USD/JPY currently trades at 107.78, approaching major support at 107.68 (03/01/2019).
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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