Asian Session Forex Recap – May 22, 2015

  • BOJ decided to keep monetary policy unchanged as expected
  • BOJ member Kiuchi voted to taper monthly stimulus to 45 trillion JPY
  • BOJ statement: Japanese economy continues to recover moderately
  • BOJ upgraded economic assessment, pushed back inflation time frame
  • Chinese CB leading index up from 0.5% to 1.1% in April
  • ECB Gov Draghi’s testimony and German Ifo business climate index due

The spotlight was on the BOJ in today’s Asian forex trading session, as their monetary policy statement was the only top-tier event on deck. As expected, the central bank decided to keep interest rates and asset purchases unchanged, with one board member voting to taper the monthly stimulus size to just 45 trillion JPY. According to BOJ member Kiuchi, they can afford to reduce their easing efforts since Japan has been consistent with its recovery.

While the rest of the BOJ policymakers opted to sit on their hands for now, they did share a slightly more upbeat view of the economy. Aside from upgrading their assessment of household spending and housing investment, central bank officials also noted that job and income conditions are improving steadily. However, BOJ Governor Kuroda had to admit that they failed to bring inflation back to the 2% target two years after starting their QE program in 2013 and suggested that it might get there by next year.

Yen pairs had a mixed reaction to the event, with USD/JPY still retreating below the 121.00 handle and facing a 30-pip loss (-0.24%) so far. EUR/JPY is up 22 pips (+0.16%), GBP/JPY is down 20 pips (-0.12%), and AUD/JPY is up 14 pips (+0.15%). Forex traders have probably anticipated this glass half-full statement from the BOJ, allowing the Japanese yen to shrug its shoulders and go “Ehh, nothing new.”

Up ahead, the forex calendar suggests that euro pairs might be in for a rocky ride, with a couple of market-movers lined up. ECB Governor Draghi is set to give a testimony at Forum on Central Banking called “Inflation and Unemployment in Europe” in Portugal at 9:00 am GMT. Note that this is Super Mario’s first opportunity to grab the mic after a couple of his ECB buddies triggered a euro bloodbath in saying that further easing measures are needed.

After this, Germany will print its Ifo business climate index for May and possibly show a dip from 108.6 to 108.3, reflecting weaker optimism. A lower than expected read could remind traders that there are still plenty of economic challenges in the region, potentially driving the shared currency lower.

Pound traders should also watch out for BOC Governor Carney’s speech at 12:00 pm GMT and the release of the U.K. public sector borrowing report which would give a glimpse on the government’s finances.

U.S. Session Recap

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