USD/JPY Fundamental Forecast – August 1, 2016

The USD/JPY is trading at 103.15 falling 222 points as the Bank held rates at -0.10% surprising the markets. Traders had expected the bank to be pushed deeper into negative rates. The Bank seems to be taking cues from the other central banks pushing off stimulus programs until their August meeting.  The Bank of Japan disappointed with its decision on Friday. While it eased its monetary policy further, by increasing its buying of exchange-traded funds, it didn’t change interest rates or increase the monetary base.

Reuters reported the BOJ will increase its ETF buying so that its holding rises at an annual pace of 6 trillion yen versus the 3.3 trillion yen previously. The BOJ left its base money target unchanged, said Reuters. The Japanese yen surged against the dollar, trading at 103.12 after the decision, compared with a session high of 105.33 before the announcement.

There will likely be further pressure on the BOJ to act, after data released from Japan’s Bureau of Statistics before market open showed prices fell for the month of June.

Nationwide, the consumer price index (CPI) fell 0.4 percent on-year, while the core CPI, which excludes fresh food items, dropped 0.5 percent on-year. The so-called core-core CPI, which excludes food and energy items, gained 0.4 percent on-year.

Consumer spending fell 2.2 percent on-year in June, a relatively steep decline compared with a Reuters poll that predicted a 0.3 percent drop. The country’s seasonally adjusted unemployment rate for June was at 3.1 percent, a 0.1 percent drop from the previous month.

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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%