BOJ: Risks to economy, prices are skewed to downside

Dhwani Mehta FXStreet

The Bank of Japan (BOJ) pushed back the timing for hitting 2% inflation target and now sees inflation reaching the price target around fiscal 2019, the policy statement showed on Thursday.

Key Points from BOJ’s Quarterly report:

Recent moves in CPI have been relatively weak

Rise in medium to long term inflation expectations has been lagging behind somewhat

Inflation expectations projected to rise as firms gradually raise wages, prices

CPI likely to continue uptrend, increase toward 2 pct

Projected rate of increase in CPI is lower mainly for the first half of 3 year projection period

Risks to economy, prices are skewed to downside

Momentum toward hitting price target is maintained but not yet sufficiently firm

BOJ to make policy adjustments as appropriate with view to maintaining momentum toward achieving price target

Forecasts:

Real GDP seen at:

+1.8 pct in fy2017/18 vs +1.6 pct projected in April

+1.4 pct in fy2018/19 vs +1.3 pct projected in April

+0.7 pct in fy2019/20 vs +0.7 pct projected in April

Japan core CPI slashed to:

+1.1 pct in fy2017/18 vs +1.4 pct projected in April

+1.5 pct in fy2018/19 vs +1.7 pct projected in April

+1.8 pct in fy2019/20 vs +1.9 pct projected in April

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

EUR/USD flirts with weekly lows near 1.1770

EUR/USD now comes under further selling pressure, breaking below the 1.1800 support to challenge the area of weekly throughs near 1.1770 on Thursday. The pair’s decline comes in response to marked gains in the US Dollar amid steady geopolitical tensions. Ealier in the day, the ECB’s Lagarde delivered cautious remarks, although the currency remained apathetic.

GBP/USD threatens the 200-day SMA near 1.3440

GBP/USD rapidly leaves behind Wednesday’s strong advance, coming under heavy pressure and retesting the 1.3440 zone, where the critical 200-day SMA is located. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold trims gains, slips back to around $5,170

Gold is now facing some downside pressure, hovering around the $5,170 region on Thursday. The yellow metal surrenders part of its earlier gains on the back of the resurgence of the buying interest in the Greenback. In the meantime, geopolitical tensions in the Middle East continue to limit the downside potential for now.