EUR/JPY Fundamental Forecast – July 22, 2016

The EUR/JPY soared 55 points to trade at 118.24 as traders moved away from safety and prepared for the ECB meeting today and the Bank of Japan meet next week. The pair has climbed steadily over the past days which might give the Bank of Japan some breathing room. CNBC reports that the euro sagged ahead of the European Central Bank’s policy meeting later in the session. While the ECB is seen standing pat on policy, the market expects the central bank to hint at future monetary policy easing, forecast to come as early as September.

If the ECB does act in September, most analysts see it extending its quantitative easing program rather than cutting interest rates. The ECB has already pledged to buy €60 billion ($66.1 billion) a month until at least March 2017. Assuming the Brexit-inspired slowdown, many analysts now expect the program to be extended for another 6 to 12 months.

Draghi and team could also adjust or entirely abandon the capital key, which determines how many bonds from each country it can buy under the QE program. The central bank announces its latest rate decision this afternoon.

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Upcoming Economic Events that you should be monitoring:

Friday, July 22, 2016

Government Bond Auctions

Date/Time Country Type

Jul 25 11:30 Germany Eur 1.5bn Jul 2017 Bubill

Jul 25 17:20 Italy Announces details of bond auction

Jul 26 11:10 Italy Holds zero-coupon/BTP€i auction

Jul 27 11:30 Germany Eur 1bn 2.5% Aug 2046 Bund

Jul 28 11:10 Italy Holds bond auction