October 21, 2019

BOJ: More flexible stimulus plan and forward guidance on rates

LQDFX news blog: BOJ: More flexible stimulus plan and forward guidance on rates

The Japanese currency dropped against the US Dollar and is set to register its biggest daily loss in 3 weeks. Let’s find out how has the BOJ policy meeting been concluded. 

The Bank of Japan has just concluded its two-day policy meeting. BOJ took dovish steps towards a more sustainable massive stimulus programme and adopted a forward guidance on rates. Thus, the Japanese central bank honored its commitment for its massive policy stimulus reassuring market players. Market analysts support that Japan did not change its policy aggressively due to its desire to keep Yen competitive.

Despite traders’ expectation for more hawkish moves, the BOJ promised to maintain its short-term interest rate target at -0.1 %. The bank’s decision said that they would allow long-term rates to fluctuate depending on economic and price developments.

EU Inflation and GDP data for the second quarter broadly met expectations and failed to move the euro.

FED and BoE meetings are in focus this week.

Wednesday: FED (FOMC) will decide whether it will hike its rates next month by another 0.25%, i.e. the third hike this year. Experts expect hawkish rhetoric to calm down traders following Trump’s comments that a strong dollar “puts us at a disadvantage”.

Thursday: Traders widely expect that ‘The Old Lady of Threadneedle Street’ will raise interests from 0.50% to 0.75%. However, ongoing concerns about Brexit and economic weakness could keep GBPUSD from climbing above the psychologically-important 1.32 level.

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Forex Market following BOJ policy meeting decision

In general Forex traders looking forward to the Central Banks’ policy meetings.

The Dollar traded flat against its major traded rivals, while it inched up 0.4% against the Yen.

The Yen dropped almost 0.4% against the greenback and 0.6% against the pound and the common currency following BoJ decision.

The Sterling inched up 0.2% on Tuesday against the US dollar and the Yen ahead of grand expectations about a rate hike by BoE. However, Brexit negotiations standstill obscures the traders’ appetite. The pound traded flat against the Euro.

Oil prices headed lower as supply rises. Brent has dropped 6% in July.

Gold prices edged down for a second straight day due to a weakening global trend, ahead of FED meeting.

Sources: Reuters, CNN money, the guardian

PLEASE NOTE The information above is not investment advice.

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