The remainder of today is relatively light on the data front for the U.S. session; but starting tonight, we hear, in some shape or fashion, from four major Central Banks. And given the context of what’s been going on with each of the four currencies represented by these Central Banks, any comments or innuendo can serve to hasten volatility in each market, helping to extend or reverse trends that have begun to show with a bit more prominence over the past few weeks. Below, we look into each situation.
JPY – Kuroda Speaks in Tokyo Later Tonight at the Bank of Japan’s International Conference
The Japanese Yen put in a key reversal last week after some comments from BoJ Governor Haruhiko Kuroda caught many by surprise. Leading into those comments, the Yen had been extremely weak as the Bank of Japan had shown no motivation to look beyond their outsized stimulus program, giving the appearance that the BoJ would be comfortably sitting on this monetary accommodation for the immediate future. With inflation continuing to lag, there’s little reason to worry about the economy ‘over-heating’, and given the BoJ’s plight with trying to stoke inflationary pressures seemingly falling flat at every turn, it made sense to expect the Bank of Japan to be one of the looser Central Banks amongst developed economies.
And then last week, Governor Kuruda mentioned that he was ‘quite sure’ that the Bank of Japan could taper and eventually exit their stimulus program with a minimum of market drama, whenever the appropriate time came. He accompanied that statement with a pledge that the BoJ always has the room to expand monetary stimulus in order to hit the bank’s goal of 2% inflation; but markets seemingly only heard the first part of that statement as it was inferred to mean that Kuroda and the BoJ are already at least thinking about life after monetary stimulus.
In short order the Yen strengthened and broke back-above multiple resistance levels; and this has left prior up-trends in USD/JPY, GBP/JPY and EUR/JPY in a rather beleaguered state.
