EUR/JPY Fundamental Forecast – July 29. 2016

The EUR/JPY dipped 48 points to 116.10 as the yen continued to climb as markets are confused over the comments from Prime Minister Abe and the Bank of Japan. It seems that the huge stimulus program that the markets expect will be over many years which will have less impact than expected.

Asian stocks edged up early on Thursday after the Federal Reserve provided a positive assessment of the world’s largest economy and lifted risk sentiment.

The dollar sagged against its peers as some in the currency market had hoped the Fed would give a clearer indication that it could raise rates within the year.

The euro, which gained 0.7 percent overnight, edged up to a nine-day high of $1.1074.

The dollar was down 0.3 percent at 105.05 yen, with caution over potential monetary easing by the Bank of Japan limiting the greenback’s losses. The BOJ concludes a two-day policy meeting on Friday.

“The best-case scenario for the market is that the BOJ decides to increase government debt purchases without cutting interest rates further into negative territory,” said Hikaru Sato, a senior technical analyst at Daiwa Securities in Tokyo.

“But the BOJ can’t save face if it does not cut rates into negative territory after it introduced the negative interest rate policy (in January), so we need to brace for such possibility, too.”

Wall Street shares ended little changed overnight following the Fed’s policy decision to leave interest rates unchanged.

The Fed did say, however, that near-term risks to the U.S. economic outlook had diminished, opening the door for a potential near-term hike in the eyes of many.

But the Fed also noted that inflation expectations were on balance little changed in recent months, and gave no firm indication of whether it would raise rates at its next policy meeting in September.

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Friday, July 29, 2016

Government Bond Auctions

Date/Time Country Type

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

Jul 28 11:10 Italy Holds bond auction