Bank of Japan Vows to Stay the Course

Daily Analysis - 26/03/2017

BoJ Governor Haruhiko Kuroda Pledges to Maintain Easing Amid Pickup in Trade

japan-stock-market


In spite of the stronger Japanese trade figures combined with the more accommodative stance taken by Bank of Japan officials, the Yen advanced even further versus the US dollar last week, extending the previous week’s gains as the outlook remains fraught with risks.

Last Week


After a disappointing deficit reported a month earlier, Japanese trade managed to swing back into surplus territory during the month of February.  The figure was bolstered primarily by the leap in exports, with the figure climbing by 11.30% during February following a 28.20% increase in trade with China.  However, import growth decelerating to 1.20% has raised some concerns about reaching the inflation target. BoJ Govenror Haruhiko reminded markets that the Central Bank would maintain quantitative easing and yield targeting to help inflation return to 2.00%.  Moving away from Japan, the next major event was the Republican failure to pass measures related to US healthcare, sending stocks lower for the week.  Apart from the political firestorm, US fundamentals remained mixed.

New home sales rose to a 592,000 annualized pace as the supply of new homes for sales continues to dwindle.  However, existing home sales fell to 5.48 million versus 5.69 million a month earlier as the National Association of Realtors warns about median prices becoming unaffordable.  Although durable goods orders came in positive, business sentiment and activity remains clouded by lacking clarity on the fiscal policy outlook.  To cap off the week, UK core inflation managed to reach the 2.00% target, with headline inflation rising to 2.30% in February.

 

popup_close
1-eurjpyweeklyreview03262017

The Week Ahead


The UK is on track for Brexit, with Prime Minister Theresa May scheduled to trigger Article 50 of the Lisbon Treaty this week now that both the House of Commons and House of Lords have approved negotiations with certain conditions.  The final revision of fourth quarter GDP is also coming due, however, no changes are expected for the period, with annualized growth expected to read at 2.00% and quarterly expansion at 0.70%.

Across the English Channel, mainland Europe is set to report preliminary inflation data, with consumer price growth forecast to pullback modestly during the period.  For the US, pending home sales are forecast to rebound by 2.00% after a contraction of 2.80% reported last month.  However, should the S&P Case-Shiller Home Price Index continue to display robust gains, it signals less housing affordability for potential buyers.  Apart from housing, the final reading of fourth quarter US GDP is due on Thursday, with expectations calling for the figure to rise modestly to 2.00%.  PCE inflation, which is the Federal Reserve’s preferred inflationary gauge will also be reported.  Moving towards Asia, Japanese inflation data and Chinese manufacturing data will round out the week, giving a better idea of how Asian economic activity is evolving amid the backdrop of risk factors.

popup_close
2-gbpusdweeklyreview03262017

Please note that CFDs are a leveraged product and may result in the loss of your entire capital. Please ensure that you fully understand the risks involved.