USD/JPY Fundamental Daily Forecast – Firming as Investors Await Release of Trump’s Phone Call Transcripts

The Dollar/Yen is edging higher on Wednesday following a steep sell-off the previous session. Although the Bank of Japan released the minutes of its July 29-30 meeting earlier in the evening, traders are primarily reacting to potential stock market volatility, following the announcement late Tuesday of a formal impeachment inquiry in President Trump’s alleged wrong-doings.

At 07:24 GMT, the USD/JPY is trading 107.307, up 0.200 or +0.18%.

Bank of Japan Meeting Minutes

It’s stale news since conditions have changed a lot since late July, but at that time, Bank of Japan (BOJ) policymakers discussed the need for the central bank to take a preemptive response to downside risks to the economy and prices, minutes of the central bank’s July 29-30 meeting showed on Wednesday.

One BOJ member said that “there was a growing risk that the strengthening of the monetary easing stance by central banks in the United States and Europe would exert downward pressure on Japan’s prices, mainly through foreign exchange rates. It was necessary to make a preventive and preemptive policy response to downside risks to prices.”

The BOJ left monetary policy steady at the July meeting but pledged to ease without hesitation to preempt risks that could hurt the chance of hitting its 2% inflation target.

Last Week’s BOJ Meeting

At its most recent monetary policy meeting on September 19, the BOJ once again held policy steady, but signaled the chance of expanding stimulus as early as its next policy meeting on October 31 by issuing a stronger warning against overseas risks.

BOJ Ready to Ease Further if Price Momentum Lost

Earlier today, Bank of Japan board member Takako Masai said on Wednesday the central bank stood ready to ease policy further without hesitation if momentum for hitting its 2% price target was lost, adding she was concerned about mounting risks from overseas economies.

“My recent concern is that, amid significant downside risks concerning overseas economies, negative effects would be exerted on prices,” Masai said in a speech to business leaders in Mie, central Japan, posted on the BOJ’s website.

Daily Forecast

The USD/JPY is showing limited reaction to the BOJ minutes with the primary focus on investor demand for risk amid the announcement of the start of an impeachment inquiry against President Trump.

The Dollar/Yen initially fell on speculation of the inquiry then rebounded slightly after Trump tweeted that he would release the full declassified transcript of his conversation with Ukraine’s president. The Forex pair has held steady to higher since House Speaker Nancy Pelosi made a formal announcement of the impeachment inquiry at 21:00 GMT on Tuesday.

Today’s price action will be influenced by how investors interpret the transcript. If they deem the transcripts as enough to bring serious charges against the President then stocks are likely to fall, driving up demand for the safe-haven Japanese Yen. If investors decide there is not enough in the transcripts to impeach the President then the USD/JPY is likely to recover some of Tuesday’s losses.