0
50
Financial market trading is expected to be tempered by the end of the week as the U.S. stock market closes on Independence Day, incentivizing
traders to favor safe haven assets amid BoE Governor Mark Carney speech on uncertainties relating to global growth, suggesting a more
dovish BoE and a potential rate cut by December 2019. Further JPY appreciation is therefore very likely as investors appear to have
digested the easing of geopolitical tensions while investors are anticipating a support for lower interest rates due to low
inflation.
2Q Tankan sentiment of Japanese manufacturers dropped to 7 from 12 during January-March period (consensus: 9) while the outlook for 3Q is
unchanged from current period, confirming a sustained downtrend since the peak at 25 in December 2017 and reflecting a continued
slowdown in Chinese demand. Based on the recent release and when conducting its quarterly assessment and forecasts for growth and
inflation, the BoJ is likely to change forward guidance at its 30 July 2019 monetary policy meeting. From current language stating
ultra-low interest rates “for an extended period and at least until spring 2020”, the BoJ is likely to change to “beyond spring 2020” as
BoJ is less likely to achieve price target so far. Under current circumstances, we consider that a 0.10 percentage point decrease in
interest rates in 2019 as unlikely unless the yen continues to appreciate and the BoJ is unable to defend the symbolic 105 USD/JPY
threshold.
Currently trading at 107.72, USD/JPY is heading along 107.50 short-term.
By Vincent Mivelaz