Bank of Japan announces modest monetary policy expansion

Currencies Direct July 29th 2016 - 2 minute read

Bank of Japan announces modest monetary policy expansion
The Bank of Japan (BoJ) was in the spotlight yesterday, as Mr Kuroda announced a modest expansion of its monetary policy. The market was left disappointed as it expected bolder measures. The BoJ acknowledged that the government is pushing for more aggressive action to weaken the yen and help Japan’s exporters, but the central bank decided to leave interest rates unchanged, at a negative level of -0.1%. EFT purchases have expanded by only ¥6tn, and the pace of QE purchases was held at ¥80tn per year. As a result, the Japanese yen rallied against every major currency and as investors digested the implications of such a move, the Nikkei stock average went into a rollercoaster ride in the aftermath of the announcement, before falling nearly 2% in the afternoon trade.

US initial jobless claims pick up

Elsewhere yesterday, US initial jobless claims picked up 14k last week to 266k, although the four-week average continues to remain relatively low. Kansas City Fed's manufacturing survey disappointed as well by falling 8pts to -6 against a market expectation of +2. In Europe, Germany reported inflation data with CPI printing a little higher than expected in July at +0.3%. The Euro area confidence showed some resilience in July despite Brexit, with key indicators rising by 0.2pts to 104.6 against a market expectation of 103.5. Business climate, industrial and services sectors also improved compared to June.
Data to come
Looking at today's calendar the market will be focusing on Europe, with France reporting its Q2 GDP report and July CPI data. In Germany, retail sales are scheduled for release and the UK will release June money and credit aggregates data and July’s CPI report. CPI data and growth figures for the Eurozone are scheduled for release in the morning, before the market turns its attention to the US, where the Q2 GDP report is released. Chicago PMI for July, and the final revisions to the July University of Michigan consumer sentiment report are also scheduled for release.

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