What’s next? – USDJPY 07.05.18

The dollar was trading 0.10 percent higher vs the Japanese yen at 109.17 as of 06:50 GMT on Monday, as market players digested BoJ’s monetary minutes and looked ahead to fresh data.

The Bank of Japan’s nine-member board expressed concerns about stepping down from its massive stimulus programme due to market volatility and inflation prospects.

“While normalisation, or a gradual reduction in the degree of monetary accommodation, could become a topic for consideration in the future, the BOJ needs to explain to markets that normalisation [...] would be different from monetary tightening,” one member of the bank’s board said.

The pair remains affected by the greenback’s dynamic. We expect the dollar to extend gains in the next few days on the back of easing geopolitical tensions and potential trade deals with China, Canada and Mexico, as well as data economic releases.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was up 0.07 percent at 92.48 by the time of this writing.

Ahead this week, investors will be looking ahead to updates on US producer price and consumer price indexes on Wednesday and Thursday, respectively.

Inflation is a key benchmark for the Federal Open Market Committee and its proper development is crucial for the future of monetary policy.

On the data front, the Labor Department said nonfarm payrolls for April missed expectations at 164,000 jobs, against an expected job creation of 189,000. Average hourly earnings were also below forecast with a modest increase of 0.1 percent.

This report had little impact on monetary policy expectation. Most traders believe the Federal Reserve will remain on its path of normalization, which is clearly a positive thing for the dollar.

Japan’s household spending will be presented at 23:50 GMT.

FortFS