The yen was king of pips during the Asian session after the BOJ’s policy decision did little dispel exit rumours for the central bank.
Meanwhile, the Aussie struggled to break above resistance levels as trade protectionist headlines swirled in the markets.
- BOJ maintains interest rates at -0.10% in January
- BOJ keeps other policies steady as expected
- Japan’s all industries activity shot up by 1.0% vs. 0.9% expected, 0.3% previous
- South Korea to ban anonymous cryptocurrency trading starting January 30
- Trump slaps steep tariffs on imported washing machines, solar panels
BOJ keeps policies steady in January
As expected, the Bank of Japan (BOJ) kept its monetary policies steady for another month in January.
Interest rates will remain at -0.10% while the pace of bond-buying will still aim to keep 10-year JGBs at 0.0%, currently at around 80 trillion JPY per month. In addition, ETF and J-REIT purchases will remain at annual rates of 6 trillion and 90 billion JPY respectively.
What caught the investors’ attention, however, is the central bank’s economic outlook where members hinted that they’re not as worried over consumer price increases as they were three months ago.
While they maintained their bias that core consumer prices show “weak developments,” they also believe that households’ and firms’ expectations of higher prices will continue to increase as inflation from the yen’s depreciation translates to higher input prices and cash earnings continue to tick higher.
BOJ head honcho Kuroda is set to give a presser at 6:30 am GMT. Many expect the central bank boss to temper tightening expectations, but a weak jawboning could lead to even more gains for the yen.
Let the trade wars begin?
Yesterday the Donald stepped up his trade game when he slapped stiff tariffs on imported washing machines and solar panels.
Apparently, the decision followed U.S. International Trade Commission reports that the products “are a substantial cause of serious injury to domestic manufacturers.”
Trump will impose 20% tariff on the first 1.2 million imported large residential washers in the first year, and a 50% tariff on machines above that number. The tariffs decline to 16% and 40% respectively in the third year.
Meanwhile, a 30% tariff will be imposed on imported solar cells and modules in the first year, with the tariffs declining to 15% by the fourth year. The tariff allows 2.5 gigawatts of unassembled solar cells to be imported tariff-free in each year.
South Korea, producer of LG washing machines, is planning to take the case to the World Trade Organization (WTO) as they believe that “The United States has opted for measures that put political considerations ahead of international standards.”
Ditto for China, the world’s biggest solar panel producer. Wang Hejun, head of the Trade Remedy and Investigation Bureau at the Chinese commerce ministry shared that the new tariff structure “is an abuse of trade remedy measures,” and that it’s “not only detrimental to the healthy development of the industries in the U.S., but will also worsen the global trade environment of relevant products.”
Wang added that “China will work with other WTO members to resolutely defend its legitimate interests in response to the erroneous U.S. decision.”
Major Market Mover(s):
The low-yielding yen clobbered its major counterparts after the BOJ’s January policies and outlook didn’t sound dovish enough for tightening junkies.
USD/JPY fell by 17 pips (-0.15%) to 110.76;
EUR/JPY dropped by 22 pips (-0.16%) to 135.79;
GBP/JPY fell by 22 pips (-0.14%) to 154.89, and
CHF/JPY slipped by 18 pips (-0.16%) to 115.13.
Whether it was talks of trade protectionism or failure to break above key resistance levels, the Aussie took a dive against its major counterparts during the session.
AUD/USD is down by 26 pips (-0.32%) to .7990;
AUD/JPY dropped 43 pips (-0.48%) to 88.49;
AUD/NZD fell by 31 pips (-0.29%) to 1.0906;
AUD/CAD slipped by 23 pips (-0.23%) to .9950, and
EUR/NZD popped up by 53 pips (+0.34%) to 1.5345.
Watch Out For:
- 6:30 am GMT: BOJ Governor Kuroda to conduct a presser
- 9:30 am GMT: U.K.’s public sector borrowing (4.2B GBP expected, 8.1B GBP previous)
- 10:00 am GMT: German ZEW economic sentiment (17.8 expected, 17.4 previous)
- 10:00 am GMT: ZEW economic sentiment (29.7 expected, 29.0 previous)
- 11:00 am GMT: U.K.’s CBI industrial order expectations