YEN FALLS FOLLOWING A DOVISH REPORT FROM BOJ
Bank of Japan (BOJ) ended their monthly monetary policy meeting earlier today, leaving interest rates unchanged. Officials left interest rates unchanged at negative 0.1%. In the accompanying statement, officials changed their language, removing the phrase for the need to start normalizing as soon as the inflation rate hit 2%. Earlier in the day, the Bureau of Statistics released CPI data that missed estimates of the analysts. In March, the Tokyo CPI rose by 0.5%, lower from last month’s 1%. The unemployment rate of the country remained steady at 2.5%.
In the United States, data from the Bureau of Economic Statistics showed that the country’s GDP for the first quarter was 2.3% on an annualized basis. This was higher than the 2.0% analysts were expecting. This was a positive thing for the economy and will likely play a role when Fed officials meet next week. In the UK, the GDP numbers for the first quarter disappointed. The numbers showed that that the GDP expanded by 0.1%, which was lower than last quarter’s 0.4%. On an annualized basis, the economy expanded by 1.2% which was lower than the 1.4% analysts were expecting. This coupled with the recent disappointing CPI data will likely remove the urgency of the BOE officials from raising interest rates in the upcoming meetings.
In Germany, the employment numbers disappointed. The numbers showed that the unemployment change was negative 7,000 compared to the negative 15,000 analysts were expecting. This number measures the change in the number of unemployed people during the previous month. The country’s unemployment rate remained unchanged at 5.3%. At the same time, the business confidence in Europe rose higher than expected.
Other big news today came from South Korea where the leader held a meeting with Kim Jong Un of North Korea. The two released a statement, saying that they will work to bring peace to the peninsula. They signed a declaration to end the 7-decade war. This is big news because it removes the chances of a major war between the two countries.
The EUR/USD pair continued to slide, reaching the lowest level since January. This came as the data from the EU disappointed while the GD numbers from the US were positive. The pair is now trading at 1.2080 which is an almost 2% gain for the dollar. In the coming week, the pair will continue being volatile as traders wait for the Fed meeting. A hawkish Fed will likely push the pair downwards.
The pair continued to slide after the UK’s GDP numbers disappointed. This comes just a week after the country’s inflation rate decreased to the lowest level since March. The slowing economy will likely remove the urgency for the BOE to hike rates as they had hinted before. In the short term, traders should watch out for the important support level of 1.3700. A cross from this level could mean more declines for the pair.
The USD/JPY pair continued the upward movements started in late March when the pair reached a low of 104.5. The pair is now trading at 109.3, which is a 5% gain from the lowest level. The current level is also the 50% Fibonacci Retracement level. The next level to watch out for is the 110.8 level which is the 61.8 Fibonacci Retracement level. The pair rose as tensions in the peninsula eased and as the BOJ officials sounded dovish. The pair could continued to rise mostly because of the divergent opinions between the BOJ and the Fed.