Yesterday saw the Fed step up to bat and despite the market responding positively to the initial statement of the release, things quickly turned sour for the USD as the statement indicated that stubbornly low inflation was here to stay for a while longer, prompting a selloff in USD and a snap up of US equities as the probability of a SEP rate hike drops further to 18% from the previous pricing in of 20%.
Today will see the BoJ step up to bat as they release their Monetary Policy Statement, Outlook Report and Press Conference. Comments out of the BOJ have been mixed of late as they test the different responses of markets to bullish and bearish statements. As it stand, the JPY has strengthened as market view the likelihood of a BOJ stimulus package as being smaller than expected. Should the BOJ show concern regarding the health of the Japanese economy, particularly the rate of inflation and the banks stance on inflation, we will see the JPY weaken across the boards as the Nikkei soars as markets anticipate more QE. However, should the BOJ be hawkish and dismiss the need for more QE, we would see the JPY appreciate across the board while the Nikkei get hit as money tightens on the Japanese economy.
Today’s key economic events are as follows:
- Spanish Unemployment Rate expected at 20.5%
- German Unemployment Change expected at -7k
- German Prelim CPI m/m expected at 0.2%
- Unemployment Claims expected at 261K
- Household Spending y/y expected at -0.4%
- Tokyo Core CPI y/y expected at -0.4%
- Retail Sales y/y -1.2%
- Monetary Policy Statement
- BOJ Outlook Report
- BOJ Press Conference
- PPI q/q expected at 0.2%
- ANZ Business Confidence previously at 20.2