Monday, 23 October 2017

What’s next? – USDJPY 23.10.17

Posted by Valentine at 12:16 Labels:

The US dollar strengthened against the yen in early trading hours on Monday as Japan Prime Minister Shinzo Abe secured a “super majority” in the country’s Parliament.

Thousands of Japanese citizens expressed support for the 63-year-old leader on Sunday. Abe could become one Japan’s longest leaders if he rules until Tokyo’s 2020 Olympics.

According to market experts, Abe’s triumph could be interpreted as further monetary stimulus for the years to come, sending speculation for Bank of Japan’s adjustments down the toilet.

Abenomics were implemented a few years ago to boost the world’s third largest economy. While stimulus was able to increase employment to levels not seen since mid ‘70s, inflation has been so lucky, remaining close to zero. Despite that fact, the regulator keeps its 2 percent target.

On Thursday, Japan will release its latest inflation figures. The report is expected to be widely monitored by investors as it could influence further decisions from the central bank/government.

With more than 310 seats in the lower house, Abe will count on a fast track to push new regulation in the future, making it easier for his coalition to rule and impose measures on the go.

The USDJPY traded 0.23 percent higher by the time of this writing at 113.77. The US dollar index, which gauges the greenback against six major rivals, was up 0.10 percent at 93.68.

Last week, the American currency strengthened across the board after the US Senate approved a Republican-backed budget that would allow GOP membership to implement tax cuts without reaching consensus with the Democratic Party.

Market players believe Trump’s tax plan will boost inflation, which eventually would force the Federal Reserve to make further adjustments to interest rates.

According to Fed funds tracked by CME Group’s FedWatch tool, investors are currently pricing in more than a 90 percent chance of a rate hike by December.

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