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Yen Drifting as BoJ Inflation Matches Forecast

USD/JPY continues to trade quietly. In the North American session, the pair is trading at 111.92, down 0.02% on the day. On the release front, it’s a quiet start to the week. The sole U.S. event was Existing Home Sales. The indicator slowed to 5.21 million in March, missing expectations and well below the February release of 5.51 million. On Tuesday, the Bank of Japan releases its preferred inflation indicator, BoJ Core CPI, with an estimate of 0.5%.

Crude has jumped to a 5-month high after the Trump administration announced that it would terminate sanction waivers given to some importers of Iranian oil, as of May 1. This move is intended to further tighten sanctions against Iran and cripple Iranian oil exports. The move has been bitterly criticized by Iran, which has upped the ante by threatening to close the Strait of Hormuz, a critical gateway for seaborne oil shipments. The rising geopolitical temperature could further boost oil prices, which are up 50% since December. Higher oil prices could weigh on economic growth and boost the safe-haven Japanese yen.

Will it be more of the same from the Bank of Japan? The markets aren’t expecting any rate moves, but investors will be closely monitoring the rate statement and outlook report regarding the economic outlook. The BoJ recently downgraded its regional growth forecasts, and a dovish message from the BoJ could weigh on the yen.

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