The JPY strengthened over night as it added to its recent gains, trading below 114 against the USD after the Bank of Japan kept rates on hold and presented a forecast which saw the growth of the Japanese economy outstripping expectations in what appears to be an uptick in the Japanese economy. The Nikkei 225 was not too impressed by the strengthening of the JPY as it slid by over 1.7% to account for the appreciation in the Yen with mostly exporting companies taking the hit. Investors will continue to watch the events in Japan, with the JPY expected to continue to strengthen as long as data out of the country is positive and more importantly as long as the global economic sentiment continues to sour, resulting in flows to safety which benefit the JPY, on the back of President Trumps aggressive first couple of weeks in office, in which he has already stirred the pot, setting US equities backwards with his policy on immigration.
US equities slid yesterday as we saw investors run for cover on the intensifying of the ramification of Trumps immigration policy, which has banned people form 7 Muslim countries form entering the US. The companies most affected are IT companies who depend on a large flow of human capital from abroad to satisfy silicon valley’s appetite for skilled IT labor. Also, taking a back seat in s the USD, which has trodden cautiously as bears slowly grind the USD lower with the USD index back at the 100 level as they continue to hammer at the support in hopes of driving the currency lower. Markets will remain sensitive to both economic and political factors, watching the unfolding of Trumps policies and upcoming economic data to try and determine the best position to take regarding the USD and US equities. Should these factors deteriorate further, we will see a further sell off in USD and equities. However, more clarity and stability in the US will see the USD and equities continue their drive higher.