Japanese Yen, USD/JPY, EUR/JPY, Bank of Japan, Covid-19 Second Wave – Talking Points:
- The Bank of Japan’s wait-and-see approach to monetary policy may bolster the Japanese Yen in the short-term.
- Haven inflows may also buoy JPY amid a wave of coronavirus-enforced restrictions in Europe.
- Descending Schiff Pitchfork continuing to guide USD/JPY lower.
- EUR/JPY in jeopardy after slicing through key chart support.
BoJ Expected to Retain Status Quo
The Japanese Yen may continue to climb higher against its major counterparts in the coming days, as the Bank of Japan is expected to keep its monetary policy levers steady at its upcoming meeting on October 29.
The BoJ’s highly anticipated Quarterly Outlook Report is expected to show Japanese policymakers revising down their growth and inflation outlooks for 2020, with Prime Minister Yoshihide Suga’s newly introduced “Go to Travel” campaign – offering government’s subsidies for domestic travel – probably cited as one of the major hinderances on consumer price growth.
Consumer prices remained unchanged for the first time since late 2016 in September, while the core inflation rate came in at -0.3%.
Source – Worldometer
Although the central bank has stated that it “will not hesitate to take additional easing measures if necessary”, recent economic and health developments suggest that the need for further monetary support may not be as intense as previously thought.
The number of new daily coronavirus infections has notably stabilized since peaking in early August, while the nation’s composite PMI is expected to show the economy is continuing to recover from the record contraction in output seen in April.
Therefore, the Japanese Yen may outperform its major counterparts in the near-term, if the nation’s current state of affairs encourages the BoJ to retain its wait-and-see approach to monetary policy.
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European Lockdowns to Fuel Haven Inflows
Souring market sentiment could also put a premium on the haven-sensitive currency, as a record surge of Covid-19 infections forces governments across Europe to impose growth-hampering restrictions.
Italy has introduced its strictest restrictive measures since emerging from a nation-wide lockdown in May, while Spanish Prime Minister Pedro Sanchez announced a national curfew as the 7-day moving average of cases surges past 12,000.
French President Emmanuel Macron is expected to announce a month-long national lockdown at a televised address on Wednesday night, as France recorded 523 deaths on…
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