BoJ Keeps Policy Settings Unchanged as Markets Await Big US Data

The Bank of Japan voted to keep all policy settings unchanged but Governor Ueda kept hopes of a Q2 hike alive after stating the probability of reaching the inflation target is increasing. Markets look ahead to big US earnings reports, Q4 GDP and PCE data.

(AI Video Summary)

The Bank of Japan has decided to keep things the same, which means they’re not changing the interest rate or yield curve control. This decision wasn’t surprising, but they did share some new forecasts that predict inflation will stay around 2%. This points to the likelihood of an interest rate hike materialises in Japan. The Japanese yen has been getting weaker as price pressures appear to be easing, but the Bank of Japan Governor believes the probability of reaching the inflation target (2%) in steadily increasing. Following this news, the Nikkei, which is a stock market index in Japan, reached a record high but ended up lower by the end of the day.

Another interesting thing to note is that the pound-yen pair reached a level of resistance at 188.80, which is an important level back in 2015 and the latter stages of 2023. The fact that there were upper wicks forming at this level indicates that the market might be getting fatigued and there could be a pullback. The RSI, which is a technical indicator, is also close to entering overbought territory. This is just a fancy way of saying that things might be getting a bit too expensive, and people might start selling.

When it comes to the Australian dollar, its value can be affected by how China stimulates their economy. China is considering providing more help, which has made people feel a little more positive about their stock market. The Australian dollar is also influenced by the US stock market and changes in risk sentiment.

There are a couple more things worth mentioning. On Thursday, there will be some important data about the US economy released, and if it’s better than expected, it could give a boost to the US dollar. And on Friday, there will be more data coming out about how much things are costing in the US, and if general price pressures show signs of stubbornness, it could help the US dollar remain supported.

Oil prices haven’t really been affected by the problems in the Middle East because most oil shipments don’t go through the Red Sea. But there are other reasons why the price of oil isn’t doing so great, like worries about the global economy and weaker oil demand growth, particularly from China.

Lastly, Tesla and Netflix will be sharing their financial updates and this is likely to add volatility to US equity markets.