The BoJ Revises Forecasts as the Focus Shifts to Corporate Earnings

The Bank of Japan downwardly revises growth and inflation forecasts. The focus will now shift to the ECB Economic Bulletin and corporate earnings.
Bob Mason
BoJ

Earlier in the Day:

The economic calendar was on the quieter side through the Asian session this morning. With both New Zealand and Australian market closed, volumes were also on the lighter side.

While there were no material stats released, the Bank of Japan delivered its April monetary policy decision.

For the Japanese Yen,

The Bank of Japan held rates unchanged at -0.10%, which was in line with market expectations. Following a string of disappointing stats, the uncertainty circled around whether there would be any immediate plans to ease policy further.

While holding the target yield for 10-year government bonds at about zero, the Bank also maintained its forecast for core CPI at 1.1% for 2019. Forecasts for 2020 were lowered from 1.5% to 1.4%, however.

GDP numbers were also revised downward from 0.9% to 0.8% for 2019 and from 1% to 0.9% for 2020.

On forward guidance, the Bank advised that interest rates would remain very low for an extended period of time.

At the time of writing, the Japanese Yen was up by 0.20% to ¥111.97 against the U.S Dollar. The Yen showed little immediate reaction to the shift in forward guidance and revisions to both growth and inflation.

Elsewhere,

At the time of writing, the Aussie Dollar was up 0.09% to $0.7021. The Kiwi Dollar was up 0.11% to $0.6600 for the session. A pullback in the greenback provided some early relief with volumes on the lighter side in the session.

In the equity markets,

The Nikkei was up by 0.26% at the time of writing, with the gains coming in spite of a stronger Yen. The Hang Seng and CSI300 were in the red early on, down by 0.08% and 0.71% respectively.

The Day Ahead:

For the EUR,

No material stats are due out of the Eurozone today. While there are no stats due for release, the ECB’s economic bulletin will garner plenty of attention later this morning.

Further negative commentary on the economic outlook would pin the EUR back in the early part of the European session.

Following the ECB Economic Bulletin, the focus will shift to corporate earnings, with risk sentiment likely to be a key driver throughout the day.

At the time of writing, the EUR up by just 0.01% to $1.1156.

For the Pound,

It’s a relatively quiet day ahead on the economic calendar. CBI Industrial Trend Order figures for April are due out this morning. Barring a material move from March’s figure, which was the weakest since May 2018, there’s unlikely to be too much impact on the Pound.

On the Brexit front, Theresa May found support from the 1922 Committee on Wednesday. The Committee rejected a rule change on Conservative Party leadership contests that leaves Theresa May as the Party leader for now…

At the time of writing, the Pound was up 0.03% to $1.2906.

Across the Pond,

Durable goods orders and the weekly jobless claims figures are due out of the U.S. The focus will likely be on the durable goods orders, with the markets looking for a bounce back from February’s 0.2% fall.

Risk sentiment will likely remain the key driver, with U.S corporate earnings in focus. Key earnings results include those for Amazon.com Inc., American Airlines Group Inc., Ford Motor Co., and South West Airlines.

At the time of writing, the Dollar Spot Index was down by 0.13% to 98.014.

For the Loonie,

The Loonie will likely remain on the defensive following Wednesday’s BoC forward guidance. There are no material stats due out of Canada today.

Market risk sentiment and the weekly EIA crude oil inventory numbers will likely have less of an impact on the day.

The Loonie was up 0.02% at C$1.3490, against the U.S Dollar, at the time of writing.

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