The BOJ will be put under the spotlight this week! How will Kuroda and his gang pursue a more “sustainable” way of stimulating prices?
BOJ’s policy and outlook (Oct. 31, Asian session)
As expected, the Bank of Japan (BOJ) didn’t make any policy changes last month. However, the meeting minutes revealed that more members are calling for a more sustainable way to stimulate consumer prices.
Kuroda’s recent speeches haven’t really been helpful in providing more clues. As early as two weeks ago the BOJ head honcho mostly just repeated the BOJ’s confidence in prices picking up and that the central bank will still keep rates “very low” for an “extended period.”
This week promises to be a more interesting one for the BOJ, as it will also share its outlook report along with its policy statement. Not only that, but Kuroda will also hold a presser some time during the London session.
Watch out for any clues on how BOJ members are planning to make their policies more “sustainable.” The latest meeting minutes showed that a clearer forward guidance was brought on the table, while “conducting market operations and asset purchases in a more flexible manner” and allowing long-term yields to “move upward and downward to some extent” also received support.
Overall risk sentiment
Another week, another chance to trade the yen as a safe haven!
As if last week’s concerns over the falling equity prices, U.S.-China trade war, the U.S. mid-term elections, Brexit, and Italy’s debt drama aren’t enough, we also have the NFP week-related shenanigans ahead of us.
Stronger-than-expected NFP-related reports could highlight the Fed’s rate hike bias and drag higher-yielding bets lower across the board.
On the other hand, weak expectations and releases could improve the demand for the dollar’s higher-yielding counterparts and take the shine off the safe haven yen.
Last Week’s Price Review
The yen will soon mark its fourth consecutive week of net wins since the yen is currently at the head of the forex pack (as of 8 am GMT).
And the yen is on course to closing out the week in first place since global bond yields are closing the week on a lower note. Also, risk aversion is the dominant sentiment this week, and the yen is apparently the safe-haven currency of choice this week.
As mentioned earlier (and as usual), yen pairs were tracking bond yields. And since bond yields are down for the week, the yen got a bullish boost.
As to why bond yields are down for the week, market analysts blamed that on safe-haven demand for bonds because of the equities rout this week.
Some market analysts also specifically cited political uncertainty ahead of the United States House of Representatives elections as one of the reasons for the slide in U.S. bond yields.
Other market analysts, meanwhile, blamed the slide in European bond yields on the poor Euro Zone PMI readings.
Aside from the decline in bond yields, most of the major global equity indices are also currently in the red for the week, which is a sign that risk aversion is the dominant sentiment this week. And as mentioned earlier, the yen was apparently the safe-haven of choice for most market players.