Bank of Japan runs out of road

September 21, 2016

The Bank of Japan delivered a whole heap of nothing at its policy meeting today, although some adjustments were made to its policy framework. If you take the time to read through these measures, then the impression is of a central bank that has largely lost the monetary plot and is undertaking an ever more complicated and convoluted approach to monetary policy. The new regime is called “Quantitative and qualitative easing (QQE) with yield curve control” but there is also “QQE with a negative interest rate”. It’s like watching a film where the plot gets ever more complicated until you don’t have a clue what is going on or who is involved with what. It would be far easier if the BoJ held its hands up and admitted that monetary policy measures had reached the end of the road, but somehow the government may not like that. USDJPY popped higher as a result of the lack of robust policy action, whilst stocks were also higher. This reaction could struggle to be sustained, as in the aftermath the market could well conclude that these measures amount to nothing.

As if this wasn’t enough excitement for one day, the long-awaited Fed decision arrives later. As we know, the market is pricing in a limited chance of a hike in rates, only around 20%. This does not preclude a change in rates, but generally the Fed likes to lead markets by the hand and such an unexpected change in rates would not be taken well by market and stock especially. On the unchanged scenario, it’s all about the tone of the statement. If largely unchanged, emphasising the data dependency of the next move, then the dollar is likely to soften modestly. If the Fed decides on a more hawkish stance (less likely in my view), then the dollar will rally, especially against the lower yielding currencies (such as the Swiss franc and euro).

Publication source
FxPro information  FxPro reviews

January 17, 2017
Oil spikes higher on Saudi Oil minister comments
Oil has spiked higher on Al Falih comments in Davos (Saudi oil minister). He said during a panel discussion at WEF in Davos that there will be inflation in the cost of doing business in the oil industry, following the squeeze that accompanied the decline in crude prices...
January 16, 2017
GBP under pressure ahead of May speech
A speech from Theresa May is one of the key events for financial markets this week and certainly the most relevant for the British pound. Primie Minister is about to deliver a speech on UK’s stance and conditions ahead of the triggering article 50 and beginning the Brexit negotiations...
January 13, 2017
Yellen (Fed) with a neutral message but USD starts to fight back
USD was taking damage from the Wednesday Donald Trump specch until yesterday evening. Lack of details on economic and fiscal agenda at the first press conference of the president-elect caused a correction on equities boosted since the US elections...

FIBO Group Rating
EXNESS Rating
FBS Rating
FxPro Rating
 FXTM Rating
FOREX.com Rating

OptionsXO Rating
IQ Option Rating
Empire Option Rating
Beeoptions Rating
Anyoption Rating
OptionFair Rating