FOREX News Today

The BoJ: Announced a policy framework overhaul, which it called “QQE with yield curve control.” It left the 0.1% negative rate charged on excess reserves unchanged, while detailing a reworked QQE program. The central bank abandoned its base money target and replaced it with “yield curve control,” whereby the BoJ will target 10-year JGB yields at current levels around 0%. The second part of the new policy framework is “inflation-overshooting commitment,” where the BoJ is committing to expanding the money base until CPI exceeds the y/y target of 2% and stays above target. The BoJ said the scale of the QQE program remained on hold, and that overall asset purchases would remain “more or less in line with the current pace,” although the maturity target has been abolished. The timeframe for achieving the 2% inflation target has been set, quite simply, as “the earliest possible time.” Aside from detailing the new framework, the BoJ also provided an assessment of the failure to have pushed CPI to 2%, blaming “exogenous factors,” including the fall in oil prices, sluggish global demand and financial market volatility. On the economy, the BoJ said recovery “is likely to remain slow.” The yen dove nearly 1% as markets digested the new framework see below.

FX Update: USDJPY is registering a near 1% gain as the London interbank take to their desks. After initially dipping as the BoJ refrain from extending its NIRP policy, the pair rallied as the yen fell across-the-board as markets digested an overhaul in the BoJ’s policy framework. It left the 0.1% negative rate charged on excess reserves unchanged, while detailing a reworked QQE program. The central bank abandoned its base money target and replaced it with “yield curve control,” whereby the BoJ will target 10-year JGB yields at current levels around 0%. The second part of the new policy framework is “inflation-overshooting commitment,” where the BoJ is committing to expanding the money base until CPI exceeds the y/y target of 2% and stays above target. USD-JPY clocked an eight-day high at 102.78. EUR-JPY and other yen crosses also vaulted higher. Whether the new framework will general sustained yen weakness remains to be seen. Spill over dollar strength following the BoJ’s announcement drove EUR-USD to a three-week low at 1.1123.

BoC’s Poloz said it is unclear if the bank will cut its forecast in October, responding to a question in his recently started Q&A with the press. He noted that the export gain in July provides some reassurance, but also said weakness in export data is unexplained. Keeping his constructive tone intact, he said he expects a large recovery in the level of non-commodity exports. As for the downward shift in inflation risks, he explained that the output gap and exports are behind the downward tilt. But the output gap is the biggest factor in lower inflation outlook he said. Responding to a question on housing, he said a slowdown in one housing market is rarely contagious. As for the renewal of the 2% inflation targeting mandate that is due in upcoming weeks, he said it is the Finance Department’s decision to make. It is a pretty high bar for changing the target, but it is not impossible, the Governor said. And repeating his previous view, he said the adjustment to the oil shock will take several years.

European Outlook: Japanese stocks jumped higher leading broad gains on other European markets after the Bank of Japan decided not to cut interest rates further. The reaction shows that markets and especially banks were weary of a further deepening of negative rates, which banks and insurers in particular are struggling to cope with. The Bank said it is shifting to a greater focus on the shape of the yield curve saying that it will increase bond purchases “more of less in line with the current pace” of 80 trillion yen per year. It also kept the door open to another rate cut. The Yen was under pressure after the decision, which underpinned the outperformance of Japanese stock markets. U.S. and U.K. futures are also higher ahead of the Fed decision, which is likely to see policy unchanged leaving the focus on the forward guidance. Oil prices are also higher, although the front end WTI future is down from earlier highs of over USD 45 per barrel at currently USD 44.89. European markets will look ahead to the Fed decision, but the local calendar also has U.K. public finance data. ECB’s Praet meanwhile stressed again this morning that the central bank will maintain a high degree of monetary accommodation.

Main Macro Events Today        

• FOMC Outlook –  The two day FOMC meeting started yesterday with the announcement and press conference scheduled for 18:00 and 18:30 GMT respectively later today. There is little chance of a rate hike this week. The lack of any indication from the FOMC that another tightening is on the way is one of the main factors suggesting policy will be left on hold for now. Additionally, recent data reports haven’t gone the Fed’s way, with weakness in employment, retail sales, and manufacturing, along with still low/moderate inflation trends.

•  RBNZ – Expectations are for no change in the base rate from its current 2.00% level, still by far the the highest in the G10 countries.

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

FOREX News Today

European Outlook: Asian stock markets are narrowly mixed, with some bourses swinging between gains and losses, as traders hold back ahead of tomorrow’s FOMC and BoJ announcements. The Nikkei closed down -0.16%. The bullish sentiment on European stock markets yesterday that was underpinned by hopes that the BoJ could add some stimulus and a pick up in oil prices, already fizzled out in the later U.S. session as the oil prices dipped again and with the front end WTI futures falling further today and threatening to fall below USD 43 per barrel, risk appetite has faded. U.S. stock futures are posting slight gains, but the FTSE 100 is down, suggesting that European markets are poised for a correction in catch up trade. The European calendar is virtually empty.

RBA Minutes: “Rising AUD would complicate rebalancing of the economy”, following slow down on mining investment. The decline in the AUD since 2013 has “continued to support traded sector of economy”. Cost pressures and wage growth set to remain low and little change expected in unemployment in coming months.  “Economy growing in line with potential” and current stance on policy “consistent with growth and inflation targets”.  Looks like its neutral for  longer and same tone as other “data dependent” central banks. AUDUSD 0.7540 and capped by the 20 DMA.

German PPI: the German PPI for August missed expectations coming in at -0.1% (0.0% expected). Slightly softer than hoped and not good news for ECB. EURUSD remains in tight overnight range pivoting around 1.1170.

U.S. NAHB Homebuilder sentiment index jumped to 65 in September: This was up 6 points from 59 in August (revised down from 60 previously). It’s the highest since last October, which was also a 65 print, and was 61 a year ago. The 2016 range has been from 58 to 65, and over the past ten years has ranged from 65 to 34  over the past decade. The future sales index also rose to 71 from 66. The index of prospective buyer traffic improved to 48 from 44. All four regions posted gains, led by the West which soared to 82 from 68.

FX Update: All quiet on the forex front, with the main currency pairings having posted ultra narrow ranges as market participants remain on the sidelines ahead of tomorrow’s Fed and BoJ policy decisions. Consensus expectations are the Fed will refrain from easing,  while there are some expectations that the BoJ to trim its -0.1% reserve deposit rate further into negative territory while skewing QQE purchases toward the shorter and middle parts of the maturity spectrum to facilitate curve steepening, with the aim of mitigating the negative effects the program has had on financial intermediation. 60% of respondents to a Reuters expected the BoJ to move this week, though there was some discord among those anticipating action in the extent of what the central bank will do. With the costs and benefits of the three-year old QQE program fading, many expect a shift in policy focus to interest rates and NIRP. How markets react is a tough call, though we think the risks for USD-JPY are to the downside. Past BoJ easing measures in the Abenomics era have generally failed to weaken the yen, and the central bank would have to be aggressive if it wants a weaker currency.

Main Macro Events Today        

• BOJ Outlook –  The two day meeting started earlier today and the announcement and press conference are scheduled for 03:00 GMT on Wednesday. There are expectations for a further cut in deposit rate and an expansion of the QE asset purchasing facility. However, in recent days there has also been market chatter that the BOJ may be concerned about the sustainability of its current stimulus programme.

• FOMC Outlook – The two day FOMC meeting starts later with the announcement and press conference scheduled for 18:00 and 18:30 GMT respectively on Wednesday. There is little chance of a rate hike this week. The lack of any indication from the FOMC that another tightening is on the way is one of the main factors suggesting policy will be left on hold for now. Additionally, recent data reports haven’t gone the Fed’s way, with weakness in employment, retail sales, and manufacturing, along with still low/moderate inflation trends.

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

http://www.topforexbrokerscomparison.com

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.