Bank of Japan Keeps Policy Steady

It’s steady as she goes for the bank of Japan.  The central bank left its monetary policy unchanged, which was widely expected.  They also cut their inflation forecasts for this fiscal year and the next one.  It seems that the 2% inflation target moves a step or two backwards at every meeting.

However, they were a tad more upbeat on the outlook for the economy, boosting their forecast for this year’s GDP to 1.8 percent from 1.6 percent.

USDJPY rallied after the meeting rising from 111.80 to 112.50

The Australia employment report was solid and AUDUSD rallied, rising from 0.7945 to 0.7987.  Australia added 14,000 new jobs and the unemployment rate was 5.6 percent.  The rally was short-lived.  AUDUSD plunged to 0.7900 on the back of profit taking after this week’s sizeable gains.

The New Zealand dollar drifted lower as traders booked some profits following this week’s rally and ahead of the European Central Bank meeting.

The ECB policy statement and Mario Draghi’s press conference is due shortly.   EURUSD has declined in a ragged fashion ahead of the meeting, falling from 1.1531 to 1.1497.  Policy is expected to stay unchanged although some traders fear that there may be broad hints as to the ECB’s QE tapering plans.  The modest overnight weakness in EURUSD is in case Mr. Draghi balks at the current EURUSD level and pushes back against early tapering news.

Sterling was under pressure despite a decent Retail Sales report.  The initial boost to GBPUSD 1.3015 was short lived and it dropped back to 1.2957.

WTI oil prices held on to yesterday’s gains which were fueled by the EIA report of declines in US crude and gasoline inventories.  WTI traded in a narrow $46.99-$4719/b range.

USDCAD ignored the recent rally in oil and continued to trade in a narrow band.  USDCAD is torn between selling pressure from firmer oil prices, a hawkish Bank of Canada, and the perception that additional Fed rate increases are on hold.  On the other hand, support is stemming from fear of the unknown.  The “unknown” in this case is the start of the Nafta renegotiation.

 

FX Ranges for major currency pairs

17-Jul-17 20-Jul-17
EURUSD 1.1515 1.1529 1.1531 1.1497
USDJPY 111.81 111.94 112.41 111.78
GBPUSD 1.3021 1.3026 1.3031 1.2957
USDCHF 0.9555 0.9537 0.9578 0.9547
AUDUSD 0.7952 0.7934 0.7987 0.7900
NZDUSD 0.7358 0.7368 0.7371 0.7336
USDCAD 1.2593 1.2637 1.2638 1.2593
GOLD 1241.46 1238.03 1242.35 1236.88
WTI 47.09 47.13 47.19 46.99

Leave a Reply

Your email address will not be published. Required fields are marked *