Yen Looks Attractive On Italian Election, US Jobs Data And More

Yen Looks Attractive on Italian Election, US Jobs Data and More

Japanese Yen Fundamental Forecast: Bullish

Talking Points:

Japanese Yen appreciated as Fed rate hike bets, US tariff proposals spooked the markets

BoJ is due, but more continuity seems likely. Attention turns to external event risk instead

Italian election, US NFPs & possible tariff retaliation threats may boost the anti-risk unit

The Japanese Yen was a relatively strong performer last week in the foreign exchange market. Unfortunately the same cannot be said about economic data performance from home. Local retail sales and industrial production growth all slowed down. Then, Finance Minister Taro Aso noted that there is a “labor shortage” after the unemployment rate dipped to about a 25-year low.

Rather, developments on the external front helped the Yen. Fed rate hike expectations swelled as Jerome Powell testified before Congress on Tuesday. A couple of days later, US President Donald Trump announced that he will impose import tariffs on steel and aluminum at 25% and 10% respectively. Both these events sent stocks deeper into the red, which boosted the anti-risk currency.

Next week brings a plethora of event risk for the Japanese Yen. At home, the final fourth quarter 2017 GDP readings are expected to rise from preliminary estimates. However, the top-tier one will be March’s Bank of Japan monetary policy announcement. More continuity seems like the probable outcome there, especially given that the recently reappointed Governor Haruhiko Kuroda spent his time last week arguing that they need to “continue monetary easing persistently”.

Interestingly, towards the end of last week, things heated up as Mr. Kuroda mentioned that the “BoJ will be considering exit around fiscal 2019”. He added that “there could be a policy change before 2% is achieved”. Traders will no doubt be looking for any further clarification or details about this at their March 9th interest rate decision.