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BOJ expected to become more dovish

Tonight’s Bank of Japan (BOJ) rate decision is expected see no policy changes and a downgrade of their assessment of the economy.  The Japanese yen has declined on growing expectations that the Bank will become more dovish; current expectations for tonight’s decision is a 44.4% that the BOJ will cut rates by 10 basis points.

The BOJ can’t ignore the terrible data prints on core machine orders, trade and inflation.  The global economy remains fragile, especially after markets may have been overly optimistic that a trade deal was going to be reached between China and US.

If the BOJ significantly downgrades their outlook that would signal fresh measures will be coming soon.  The question would be will they stick to going more deeply negative with rates, adjust their QQE yield control, or increase their asset purchases.  Fresh stimulus could continue to weigh on the Japanese yen, but the risk aversion risks could keep safe-haven assets like the yen strong.  The BOJ may try to hold off on doing anything and wait and see if see global growth concerns ease over the next couple months.

 

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Ed Moya

Ed Moya [4]

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya