7 Aug 2015
JPY to retain its bearish tone – BTMU
FXStreet (Edinburgh) - Derek Halpenny, European Head of GMR at BTMU, reviewed the recent BoJ meeting and steady stance.
Key Quotes
“Given we are now set for confirmation later this month that the economy contracted in Q2 by about 0.5% Q/Q, this broad unchanged assessment points to the BOJ perhaps being unrealistically optimistic”.
“There is certainly an increasing risk that speculation on additional easing by the BOJ builds”.
“The view of an inflation pick-up in H2 is less convincing now given the plunge in crude oil prices in July and a continued lack of evidence in the official CPI data of a pick-up will lead to inevitable speculation that the BOJ may need toease further”.
“We do see reason for the yen to strengthen on a TWI basis. A rapidly expanding current account surplus, the potential easing of GPIF portfolio outflows as new target benchmark levels are reached and the shift in rhetoric from Tokyo that points to a greater desire for stability rather than further weakness are all factors that may well support the yen”.
“However, an intensification of speculation on further BOJ easing as the Fed moves to raise rates for the first time would certainly shift the risks toward a period of further yen weakness. A strong jobs report today would likely take USD/JPY to test the high of 125.86 set on 5th June”.
Key Quotes
“Given we are now set for confirmation later this month that the economy contracted in Q2 by about 0.5% Q/Q, this broad unchanged assessment points to the BOJ perhaps being unrealistically optimistic”.
“There is certainly an increasing risk that speculation on additional easing by the BOJ builds”.
“The view of an inflation pick-up in H2 is less convincing now given the plunge in crude oil prices in July and a continued lack of evidence in the official CPI data of a pick-up will lead to inevitable speculation that the BOJ may need toease further”.
“We do see reason for the yen to strengthen on a TWI basis. A rapidly expanding current account surplus, the potential easing of GPIF portfolio outflows as new target benchmark levels are reached and the shift in rhetoric from Tokyo that points to a greater desire for stability rather than further weakness are all factors that may well support the yen”.
“However, an intensification of speculation on further BOJ easing as the Fed moves to raise rates for the first time would certainly shift the risks toward a period of further yen weakness. A strong jobs report today would likely take USD/JPY to test the high of 125.86 set on 5th June”.