EUR/JPY Weekly Fundamental Analysis – February 1-5, 2016 -Forecast

Weekly Analysis and Recommendations:

The EUR/JPY will open the new month at 131.19 up by 2.29% after the Japanese currency tumbled after the Bank of Japan meeting and its move to negative interest rates while at the same time data from Japan printed well below forecast. The Bank of Japan has shocked global markets by driving its official interest rates into negative territory.

In a close run five to four vote, the central bank board moved the official interest rate down a notch from 0 to -0.1 per cent.

In addition, the BoJ will maintain its quantitative easing program, expanding its asset base at a rate of 80 trillion yen ($930 billion) a year through buying up Japanese Government bonds, stakes in real estate trusts and electronically traded funds.

The main Japanese share market index, the Nikkei, initially surged on the news but slumped back into the red afternoon trade, before rising again to be up 2.3 per cent.

“Markets are unlikely to react well to a big yuan devaluation, and the further the ECB [European Central Bank] and the BoJ force their currencies down the more they push the PBoC [People’s Bank of China] to act themselves.”

BoJ governor Haruhiko Kuroda had been under increasing pressure to do more in the face of stubbornly low inflation, a rising Yen and stock market that is in bear territory, dropping more than 10 per cent this year.

The BoJ now joins the European Central Bank driving rates below zero to attempt to stimulate its moribund economy.

The move also falls in line with an increasingly “dovish” tone from the world’s central bankers in response to market turmoil, mounting pessimism over prospects for growth and fears about deflation.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our  weekly reports and we provide daily updates and outlooks.

Major Economic Events for the week:

 

Upcoming Government Bond Auctions

Date Time Country 

Feb 02 n/a UK Details of Gilt auctions on Feb 09 & 11

Feb 03 11:03 Sweden Holds bond auction

Feb 03 11:30 Germany EUR 5bn Apr 2021 Bobl

Feb 03 n/a Netherlands Details of DSL auction on Feb 09

Feb 03 n/a US Details of 3 & 10-yr notes on Feb 09/10

Feb 03 n/a US Details of 30-year bond auction on Feb 11

Feb 04 11:50 France Holds bond auction

Feb 04 17:20 Sweden Details of I/L bond auction on Feb 11