Although the Bank of Japan views headwinds to the Japanese economy as more significant now, a tightening labour market suggests that inflation could finally accelerate, something that should support JPY strength into the end of the year, according to Jeremy Stretch and Bipan Rai, analysts at CIBC. 

Key Quotes: 

“The BoJ’s latest macro assumptions include increasing growth headwinds, which have contributed to a weaker inflation outlook. However, the bank still assumes stronger export growth in 2019 despite global concerns. The BoJ also remains cognisant of the unintended consequences of their ultra-easy monetary policy stance on financial institutions. However, the chances of a material policy adjustment in upcoming months remains doubtful.”

“While we expect the policy of stealth tightening to continue, investor flows via the weekly MoF bond flow data continue to reveal solid domestic appetite for overseas bonds. Therefore, it’s unsurprising that outside of extreme risk-off episodes, elevated spreads versus JGB’s have attracted domestic investors, thereby limiting JPY impetus.”

“The extension of stealth tapering, combined with signs of a gradual pick up in wage growth, should support JPY ahead. Annual average earnings advanced for a fourth consecutive month into year-end, underlining labour market tightness as seen in the job-to-applicant ratio which is near-50 year highs. That suggests that the BoJ will continue to view underlying conditions as consistent with rising inflation expectations, which should see the yen strengthen, with USDJPY reaching 105 by the end of 2019.”
 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD supported at 1.1200 ahead of Eurozone data

EUR/USD managed to retain the 1.12 handle amid broad-based US dollar bullish consolidation, as markets seem to have scaled back expectations of Fed rate cuts. Focus on Eurozone final CPI data.

EUR/USD News

GBP/USD attempts a bounce again above 1.2400, UK CPI eyed

The latest leg down in the GBP/USD pair found buyers near 1.2380 region, with the rates now attempting another recovery above the 1.24 handle heading into the key UK CPI data release. 

GBP/USD News

USD/JPY consolidates in a range, comfortably above 108.00 handle

Reviving safe-haven demand underpins JPY and exerts some pressure. Renewed weakness in the US bond yields further weighed on the USD. The downside remains limited amid tempered Fed rate cut expectations.

USD/JPY News

Gold clings to 21-DMA amid less active markets

Gold carries the 3-week old lower high formation forward as it clings to 21-day moving average (DMA) during Wednesday’s less active market hours ahead of the European session. Lack of major data/news during the Asian session limits market moves.

Gold News

Forex Today: US dollar corrects, US-Japan eye a trade deal, and Bitcoin bounces

US dollar reverses a part of Tuesday’s US retail sales data-led rally. US-Japan are working towards a trade deal by September. Bitcoin recovers, but remains below the 10k mark.

Read more

MAJORS

Cryptocurrencies

Signatures


  •  
  •  
  •  
  •  
  •