A pretty busy week for the yen, as Japan is set to print top-tier reports including the BOJ’s policy decision. Here’s what’s up!
Japan’s economy depends heavily on its manufactured exports, so traders pay close attention to machinery-related reports.
The preliminary machine tool orders (Mar 11, 6:00 am GMT) printed a whopping annualized 18.8% drop in January. Will February’s numbers show any improvement?
The quarterly BSI manufacturing index (Mar 11, 11:50 pm GMT) is expected to reflect a deterioration of optimism. The report could come in at 4.8 after printing a 5.5 reading in Q4 2018.
Last but not the least, the core machinery orders (Mar 12, 11:50 pm GMT) report is expected to fall by 1.5% (from -0.1%) in January. Ditto for the annualized reading, which is seen to fall by 2.1% (from +0.9%) during the month.
BOJ’s policy decision (Mar 15, Asian session)
If you remember, the Bank of Japan (BOJ) didn’t make policy changes last month.
However, Governor Kuroda and his team also cut their inflation outlook for the fiscal year ending in March down from 1.4% to 0.9%. This could delay the BOJ’s tightening schedule, so the yen understandably traded lower.
This week analysts don’t expect the central bank to make any changes to its interest rates and 10-year Japanese government bond targets.
Expectations around the BOJ’s purchases are a bit more mixed. While some believe that a (relatively) stable yen could give the central bank more room to hold their policies, other market bees are buzzing about the BOJ possibly pulling an ECB and announcing plans of dropping more stimulus on the economy.
Mixed expectations tend to produce higher volatility in the markets. That means you have to stay glued to your tube in case this week’s policy decision leads to strong moves for the yen!
Market risk sentiment
What’s a trading week without trading the yen as a safe haven?
The forex calendar is busy with top-tier reports in major economies this week, including Uncle Sam’s retail sales and CPI reports; the U.K.’s GDP and annual budget details, and industrial production and Germany’s trade data from the euro zone.
Oh, and don’t forget that in a few days British policymakers are scheduled to vote on how Britain exits the EU this week! Will a hard Brexit be more likely after this week’s round of voting?
Missed last week’s price action? Read JPY’s price recap for March 4 – 8!