Yen Retreats Ahead Of Formal BOJ Announcement Tomorrow And U.S. CPI

The markets are consolidating as we approach the formal Bank of Japan (BOJ) announcement tomorrow and the announcement of the U.S. Consumer Price Index (CPI). In addition, the pre-weekend news of Bank of Japan’s deputy governor Amamiya turning down the promotion and former deputy governor Ueda being appointed tomorrow has left market participants trying to grasp the meaning of it all.

Japan’s BOJ Announcement Tomorrow

The pre-weekend news of Bank of Japan’s deputy governor Amamiya turning down the promotion and former deputy governor Ueda being appointed tomorrow has left market participants trying to decipher what the government’s preference is for the future of the BOJ. While Ueda has previously cautioned against an early exit from the extraordinary monetary policy, there may be an insight into the sequencing of an exit strategy.

Japan’s Q4 ’22 GDP is also being reported tomorrow, with expectations of a rebound after a contraction in Q3. While the monetary policy outlook is focused, the GDP report may provide insight into the country’s economic recovery.

Continued Aerial Harassment from China

China’s ability to secure a rapprochement and leave its “wolf diplomacy” behind is reportedly strained. Despite renewing coal imports from Australia, China’s ongoing aerial harassment of Taiwan raises concerns for potential escalation. Chinese bourses were the only large market in the Asia-Pacific region that advanced today.

Market Performance

Japanese stocks were sold despite the yen’s retreat, with the Nikkei off almost 0.9%. Meanwhile, Europe’s STOXX 600 has recouped about half last week’s 0.6% loss. The dollar is mostly softer but mostly +/- 0.15%. The greenback has recovered to within spitting distance of last week’s high (~JPY132.90) after slipping briefly below JPY130 before the weekend. Most emerging market currencies are softer. Gold is finding support ahead of $1850; it’s low in over a month. March WTI is consolidating within the pre-weekend range.

Related Facts

• Investors are keeping an eye on ongoing air space activity that has led to a few objects being shot down over the U.S. and Canadian airspace.
• China’s coal imports from Australia have resumed, despite ongoing issues between the two countries.
• OPEC makes its monthly report tomorrow, followed by the IEA on Wednesday.

Key Takeaway

The markets are consolidating ahead of major announcements from the Bank of Japan and the U.S. Consumer Price Index. Furthermore, ongoing tensions between China and Taiwan are cause for concern and air space activity over North America. In addition, the market keeps an eye on potential changes to BOJ monetary policy as the focus shifts to economic recovery.

Conclusion

As the markets consolidate, it’s important to watch major announcements from the Bank of Japan and the U.S. Consumer Price Index. In addition, ongoing global tensions and economic recovery will continue to impact market performance.