USD/JPY and EUR/JPY should be reloaded now This week’s Bank of Japan policy decision will be to hold rates. USD/JPY continued to strengthen ahead of critical US Federal Reserve and BoJ meetings. The BoJ has made it clear: no change should be expected. In addition, the trade dispute with the US has caused some distortion in the market pricing of the Euro. Monetary policy divergence remains the primary drive in USD/JPY positioning.
Inflation is far off target, and the BoJ has said that changes would materialize only when inflation reaches the bank’s target. Growth has also disappointed, led by weakening private demand, indicating a target-hit is also unlikely next year. Investment and consumptions could easily correct lower should, weighing on wages and prices, should the market feel that the stimulus is now causing stocks to fall. Therefore, further easing could be on the table to prop-up asset prices and confidence. Finally, the political threat to Prime Minister Abe and ‘Abenomics’ has faded. With a firm grip on power, Abenomics could fire up again.
This report has been prepared by AC Markets 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 AC Markets personnel at any given time. ACM 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.