JPY outperforms on BoJ outlook – Scotiabank

The Japanese Yen (JPY) is firmer again this morning, notching up a 0.5% gain on the US Dollar (USD) behind a Bloomberg report that Bank of Japan (BoJ) officials think it is likely that they will raise the policy rate next week—barring a disruptive start to Trump’s presidency, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

BoJ is likely to tighten rate policy next week

“Swaps reflect 20bps of tightening priced in for the January 24th meeting. US Treasury bond yields stabilizing around yesterday’s lows have also helped JPY sentiment improve. High beta/ EM FX is underperforming, with the MXN and NOK at the foot of the overnight performance table against a generally steady to slightly firmer USD.”

“The GBP softened and UK bond yields eased in response to weaker than expected UK growth data. The Fed’s Beige Book release yesterday noted the economic activity had increased ‘slightly to moderately’. On balance, contacts were more positive about the economic outlook but, in ‘several districts’ there were concerns that the impact of tariff and immigration policy under the incoming administration ‘could negatively affect the economy’.”

“Those concerns support the idea that policymakers are liable to take some time to asses the impact of president-elect Trump’s initiatives before their next rate decision. US data releases this morning include Retail Sales, the Philly Fed survey, Import Prices, weekly claims, Business Inventories, and the NAHB Housing Market Index. Consumers frontrunning tariffs are expected to help drive another healthy lift in sales. China releases, GDP, Industrial Production and Retail Sales data tonight.”