Yen weakens As BoJ Signals Readiness To Cut Rates

Yen weakens As BoJ Signals Readiness To Cut Rates
June 26, 2019


The Japanese yen started weakening yesterday after the Bank of Japan indicated its willingness to implement further monetary easing if the economy requires a stimulus. Notably, the yen weakened despite the release of positive economic data. From a low of 107.08, the USD/JPY pair rose to a high of 107.52 in the last 24 hours.

The Cabinet Office of Japan stated that the coincident index rose to 102.10 in April, an increase from 101.10 in the earlier month. The index surpassed economists’ estimate of 101.90. The index is significant because it takes several criteria, such as employment, factory output, and retail sales, into consideration.

Likewise, the economic index in April was 95.9, a slight increase from 95.7 in the prior month. The reported figures also surpassed analysts’ estimate of 95.50. Even this index is widely tracked by economists, speculators, and investors because it takes 12 economic indicators into consideration. This includes stock prices, machinery orders, and account inventory ratios.

The figures contradict retail sales contradiction, unaltered unemployment rate of 2.4%, and a small gain in industrial production in May.

Economy minister Toshimitsu Motegi stated yesterday that he would interact with Robert Lighthizer, the US Trade Representative, later this week to get ready for tough US-Japan trade negotiations. The White House intends to minimize the trade deficit and boost exports, while Japan prefers a decrease in US tariffs on Japanese goods.  Motegi said that he would provide further details soon.

If the new trade agreement affects Japan, the world’s third-largest economy, then the central bank is prepared to intervene and announce further stimulus programs. Even though the Bank of Japan did not alter interest rates in the recent monetary policy meeting, it still hinted that it is absolutely ready to implement monetary easing in line with the US and several European central banks.

During a news conference, Governor Haruhiko Kuroda said, “If the economy loses momentum toward achieving our price target, we’ll, of course, consider expanding stimulus without hesitation. Downside risks regarding overseas economies are big, so we must carefully watch how they affect Japan’s corporate and household sentiment.”

The currency market is also closely watching for signals from trade talks that started between the US and Japan yesterday. Officials representing both countries put forth their point of view regarding industrial goods last week and agricultural products yesterday. Markets will be carefully watching for retail sales data to be released tomorrow and labor figures and industrial output figures to be published on Friday.

The dovish statement made by the central bank of Japan is anticipated to keep the yen weak in the days to come.

Technically, the USD/JPY is receiving solid support at 107.25 levels. The next resistance is anticipated only at 108.50 levels. The oscillator of moving average has a positive reading. As a result, we can expect the currency pair to move up in the short-term.

JPY - technical analysis - 26th June 2019

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Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be

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