Bank of Japan Disappoints Financial Markets

After hopes for a bigger and more aggressive monetary stimulus package were dashed by the latest Bank of Japan decision, the Yen continues its recent trend of strengthening, keeping the prevailing downtrend from the outset of the year intact.  Although the Central Government under the stewardship of Prime Minister Shinzo Abe pressured the Central Bank to act more aggressively, the Bank of Japan refrained from dropping interest rates further, instead opting to focus on ETF purchases and lending to corporations to help spur the export economy.  This decision comes on the heels of a more pronounced decline in household spending which fell by -2.20% on an annualized basis combined with the consumer price index which remained firmly in deflationary territory.  The silver lining was a slight improvement in the unemployment rate and improved industrial production.  EURJPY had fallen as much as 200 pips on the session, before rebounding modestly to 114.60.

Amid widespread concerns about the pace of inflation in the Euro Area, the latest data made available from the Federal Statistical Office Germany showed that German inflation picked up slightly during the month of July according to preliminary data.  Monthly consumer prices rose by 0.30%, beating the prior periods 0.10% print while annualized headline inflation improved to 0.40%.  The data coincides with other positive data on HICP inflation which is a Euro Area-wide measure for consistency in comparing the members of the Euro Area.  Additionally, unemployment managed to stay at record lows of 6.10% with the number of unemployed falling by -7,000 during July.  However, the state of progress for the aggregate region will visible later today with upcoming Euro Area inflation and unemployment figures alongside a preliminary second quarter GDP reading.  The German DAX 30 finished Thursday’s session modestly higher, with the index trading slightly lower ahead of today’s reports.