Article Highlights

  • China’s markets out on Spring Festival holiday
  • AU private sector credit up by 0.7% vs. 0.5% expected and previous
  • BOJ keeps policies unchanged, upgrades growth forecasts
  • Japan’s housing starts (y/y) up by 3.9% vs. 8.5% expected, 6.7% previous
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The low-yielding yen gained ground across the board on the back of overall risk aversion and a not-so-dovish BOJ statement.

Major Events:

BOJ’s policy decisions – Earlier today the Bank of Japan (BOJ) has decided to keep its monetary policies steady as expected.

The BOJ is still applying a -0.10% interest rate and buying 10-year JGBs with the intention of keeping its yields “around zero percent.” Meanwhile, there are no changes to the pace of increases of purchases of ETFs (6T JPY) and J-REITS (90B JPY) and outstanding amounts of CP (2.2T JPY), and corporate bonds (3.2T JPY) are also maintained.

Perhaps the most significant part of the announcement is the BOJ’s unanimous vote to extend the deadlines of new applications for its programs such as the:

Fund-Provisioning Measure to Stimulate Bank Lending
Fund-Provisioning Measure to Support Strengthening the Foundations for Economic Growth
Funds-Supplying Operation to Support Financial Institutions in Disaster Areas affected by the Great East Japan Earthquake and by the Kumamoto Earthquake.

The BOJ also printed its latest economic forecasts, which reflected slightly better expectations for both GDP compared to their fiscal year outlook last October. Forecasts for inflation, however, were adjusted lower and mostly kept unchanged.

2016 GDP is up from 1.0% to 1.4%
2017 GDP is up from 1.3% to 1.5%
2018 GDP is up from 0.8% to 1.1%

2016 inflation is down from -0.1% to -0.2%
2017 inflation is kept at 1.5%
2018 inflation is kept at 1.7%

BOJ head honcho Kuroda is set to take center stage and give a presser at 7:30 am GMT. Look out for hints on how the BOJ is reacting to Trump’s Presidency or any plans to extend its easing programs!

Overall dollar weakness – The Greenback failed to gain upside momentum during the Asian session after Trump fired U.S. Attorney General Sally Yates late Monday.

If you recall, Yates ordered the Justice Department not to enforce his immigration ban order, saying that she’s not quite convinced the order was constitutional. White House spokesman Sean Spicer announced in a tweet that Dana Boente, U.S. attorney for the Eastern District of Virginia, is set to replace Yates.

Not surprisingly, uncertainties over Trump’s latest set of actions spread risk aversion across Asian markets. Well, the ones that were open, at least.

Australia’s A SX 200 is down by 0.61% while Nikkei, which took further hits on the overall dollar weakness, is down by 1.38%.

Major Market Movers:

JPY – Overall risk aversion and a not-so-dovish BOJ announcement drove traders into buying the low-yielding yen.

USD/JPY is down by 13 pips (-0.11%) to 113.54, GBP/JPY dipped to its intraday lows around 141.77, and AUD/JPY finished the session at 85.88 after hitting a session high of 86.09.

Watch Out For:

  • 7:30 am GMT: French preliminary GDP (0.4% expected, 0.2% previous)
  • 7:30 am GMT: BOJ’s press conference. Look out for more dovish remarks!
  • 8:00 am GMT: German retail sales (0.6% expected, -1.8% previous)
  • 8:45 am GMT: French consumer spending (0.2% expected, 0.4% previous)
  • 8:45 am GMT: French preliminary CPI (-0.5% expected, 0.3% previous)
  • 9:00 am GMT: ECB’s Draghi to give a speech in Frankfurt
  • 9:00 am GMT: Spanish flash CPI (2.4% expected, 1.6% previous)
  • 9:55 am GMT: German unemployment change (-5K expected, -17K previous)
  • 10:00 am GMT: Italian monthly unemployment rate (11.8% expected, 11.9% previous)
  • 10:30 am GMT: U.K. net individual lending (5.3B GBP expected, 5.1B GBP previous)
  • 10:30 am GMT: U.K. mortgage approvals (69K expected, 68K previous)
  • 11:00 am GMT: Euro Zone CPI flash estimate (1.5% expected, 1.1% previous)
  • 11:00 am GMT: Euro Zone core CPI flash estimate expected to remain at 0.9%
  • 11:00 am GMT: Euro Zone preliminary flash GDP (q/q) (0.4% expected, 0.3% previous)

See also:

U.S. Session Recap
London Session Recap

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