EUR/JPY Fundamental Forecast – August 1, 2016

The EUR/JPY is trading at 114.86 down 175 points after the shock from the Bank of Japan this morning. Not only did the bank hold interest rates at -010% but they did not add any additional monetary stimulus. They only expanded their list of approved assets that the bank would begin to purchase. It seems that helicopter money will be put off until August. The Bank will hold its press conference in a few hours where Governor Kudora will explain his rationale. In the meantime, this will put additional pressure on the Abe government to reverse the decline economy through fiscal stimulus programs.

This morning data showed that Japans retail sales printed lower than expected while industrial production reduced and inflation missed expectations. Apparently, the big picture remains that output growth is stagnant and deflation risks are building. This set of fresh data supports the case that the BOJ will expand asset purchases and/or cut rates at today’s meeting. Nonetheless, even if the BOJ moves, it is uncertain whether the scale and the form of policy easing will boost confidence and drive the financial markets in the right direction, given that investors’ expectations for easing have been exceptionally high ahead of this meeting. Meanwhile, it is unclear whether the BOJ will improve policy communications and address investors’ concerns regarding the side effects of negative rates, the sustainability of the QQE program and the credibility of the 2% inflation target. Overall, there are too many goals for the BOJ to reach and achieving all the goals without disappointment won’t be an easy task.

FxEmpire provides a wide variety of analysis on a daily, weekly and monthly basis ranging from our exceptional technical analysis as well as our in-depth fundamental analysis along with our daily news and market updates. To get the best understanding of each asset it is important to review the short term daily analysis with the longer term monthly reports. To get email notification when each of these are posted please sign up for our daily newsletter.

Upcoming Economic Events that you should be monitoring:

Monday, August 1, 2016

Government Bond Auctions

Date/Time Country Type

Aug 2   JPY                  10-Year JGB Auction                          -0.243%

Aug 2   USD                4-Week Bill Auction                           0.270%