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Bank of Japan leaves rates on hold

The Bank of Japan (BoJ) kept interest rates on hold overnight at their latest policy meeting.

Pound/Euro exchange rate rallies as ECB slashes Eurozone 2019 growth forecast

The Bank of Japan (BoJ) kept interest rates on hold overnight at their latest policy meeting.  In line with expectations, attention now reverts to the U.S. Fed meeting this Wednesday. The BOJ left its massive asset purchase program and forward guidance unchanged at the monetary policy meeting on Tuesday, stating that it will ramp up stimulus “without hesitation” if needed.

The central bank also trimmed its inflation forecasts and warned that risks were to the downside, claiming global growth issues as the primary reason as to why they will fall short of their 2% inflation target.

Monetary policy is likely to set the tone for currency markets in coming months, as central banks from Australia, New Zealand, Europe and possibly Britain are expected to cut rates due to low inflation and risks to global economic growth.

The Fed meet this Wednesday at their latest policy meeting, where market expectations are for them to cut interest rates by 25 basis points, although some feel this could be as much as a 50-point cut. Trade disputes, higher prices due to tariffs and fluctuating data are seen as risks by the Fed, who are looking to stave off the risks posed to the global economy with what many feel is an insurance cut.

In UK news, the pound continued to suffer yesterday, as Prime Minister, Boris Johnson, indicated that he would seek significant concessions from EU negotiators, as his team step up preparations for a no-deal Brexit.

Sterling fell to its lowest levels since March 2017, touching an overnight low of 1.2119, whilst levels against the euro dropped beneath the significant psychological level of 1.10, hitting an overnight low of 1.0976.

The Bank of England (BoE) present their inflation report and interest rate decision this Thursday, however the accompanying statement is likely to be the focus. Sterling is 17% lower now than before the referendum on 23rd June 2016. In their previous address the BoE pointed to a decline in business output throughout 2018 and a subdued housing market. However, this time around the market will be looking for clues relating to monetary easing.

Today sees U.S. income data at 1:30pm and home sales data at 3pm.


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