EUR/JPY Fundamental Forecast – July 25, 2016

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Published: Jul 22, 2016, 03:55 UTC

The EUR/JPY took its clues from the USDJPY which is steady in the morning session. There has been little action in the currency markets with a lack of

EUR/JPY Fundamental Forecast – July 25, 2016

The EUR/JPY took its clues from the USDJPY which is steady in the morning session. There has been little action in the currency markets with a lack of economic data on the schedule in the morning. The ECB held rates and policy as expected and Mario Draghi kept his tone rather subdued causing no volatility in the markets. The big focus is now the Bank of Japan meeting next week. The pair is trading at 116.66.

The ECB held rates at record lows as it seeks to revive growth and inflation with cheap credit to the economy. It left the door open to more policy stimulus, highlighting “great” uncertainty and abundant risks to the economic outlook.

Media reports Thursday said the Japanese government is arranging to compile an economic stimulus worth Y20 trillion ($ 187 billion) to vault Japan out of more than a decade of deflation. The stimulus is higher than the originally envisaged Y10 trillion worth package, due to inclusion of infrastructure-related outlays and the use of low-interest government loans, the reports said.

The reports caused a positive surprise, with investors scrambling to sell the Japanese currency from earlier in the session. “Expectations (for Tokyo’s strong policy steps) have been maximized,” said a market analyst.

Investors’ expectations have already remained high since Prime Minister Shinzo Abe recently pledged to compile comprehensive and bold steps. Mr. Abe’s meeting earlier month with former Federal Reserve Chairman Ben Bernanke, an advocate of monetization, has fueled speculation that he might be considering the use of ‘helicopter money,’ where a central bank directly underwrites government borrowing.

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Monday, July 25, 2016

Country	Name	Volatility	Previous
JPY	Adjusted Merchandise Trade Balance	2	269.8
JPY	Merchandise Trade Balance Total	2	-40.7
JPY	Imports (YoY)	2	-13.8
JPY	Exports (YoY)	2	-11.3
EUR	IFO – Expectations	2	103.1
EUR	IFO – Business Climate	2	108.7
EUR	IFO – Current Assessment	2	114.5
USD	Dallas Fed Manufacturing	2	-18.3