Market Drivers June 16, 2017
BOJ leave policy unchanged
EZ inflation declines
Nikkei 0.56% Dax 0.45%
Europe and Asia:
JPY BOJ Leaves Policy unchanged
EUR EZ CPI -0.1% vs. 0.1%
USD Building Permits/Starts 8:30
USD U of M 9:50
The dollar rally continued unabated against the yen but stalled against other major currencies in a generally quiet end of week trade.
USDJPY pushed through the 111.00 figure on the back of residual follow through from Wednesday’s FOMC meeting as US yields continued to firm modestly. In Japan, the BOJ left its policy statement largely unchanged noting that its will continue to increase its holdings at the current pace of 80 Trillion yen per year.
The BOJ maintained its short-term interest rate target at -0.1% and kept the 10-year JGB rate at 0%. The central bank kept economic assessment unchanged, noting that the Japanese economy has been turning toward a moderate expansion. Finally, in a modestly upbeat note, it raised assessment on private consumption which has seen its best gains in 7 months stating that it is improving on steady gains in job and income conditions.
Overall there was very little for the market to react to and the pair generally saw muted movements in post news trade.
Elsewhere, the EURUSD was better bid rising from the 1.1150 level as some short covering kicked in after yesterday’s selloff. Some notes from IMF which noted the improving conditions in the EZ may have helped as well, although the latest CPI data from the region once again showed deflation as prices tumbled -0.1% on the month. Most of this was anticipated from last week’s warnings from the ECB, but it nevertheless shows that despite better growth in the region inflationary pressures remain muted and that is likely to keep ECB policy stationary for the time being.
In North America today the calendar is light, with only Housing Starts and U of M consumer sentiment readings. The market is looking for a rebound in housing data and essentially the same reading from U of M as last month. It will be interesting to see if the turmoil in Washington DC has any impact on consumers or if sentiment will remain largely static.
US yields are trading mildly higher today, but for USDJPY rally to continue the 10 year needs to trade back to 2.20% level. If bonds can manage a bit of a selloff then USDJPY is likely to clear 111.50 as the day proceeds.