The Japanese yen increased against the USD after the Bank of Japan delivered its first monetary policy decision of the year. The bank left interest rates unchanged at -0.1% as was widely expected. The bank also reiterated that it would continue buying Japanese Government Bonds (JGBs) to ensure that the yield of the ten-year government bonds remained at around zero percent. The bank also committed itself to continue with quantitative and qualitative monetary easing with yield control. The goal of the QQE is to push the inflation rate to the target of 2%. This will be a difficult task. Inflation has been inexistent in Japan even with low interest and unemployment rates.
The sterling was relatively unchanged during the Asian session. The markets will focus on the currency today ahead of the release of employment numbers from the UK. Economists polled by Reuters expect the unemployment rate to have remained unchanged at 3.8%. The claimant count change is expected to come in at 22.6k. Meanwhile, economists expect wages to have softened in December. The average earnings plus bonus is expected to have eased from 3.2% to 3.1%. Wages without bonuses are expected to have decreased from 3.5% to 3.4%. These numbers will come at a time when most market participants expect the BOE to cut rates this year.
Asian stocks declined today after the International Monetary Fund (IMF) downgraded global growth. This is despite the signing of the first phase of a US trade deal with China and clarity on Brexit. In its outlook, the IMF said that it saw “no clear signs of a turning point” for the global economy. It now expects global growth for 2019 to come in at 2.9%. This will be the worst number since the global financial crisis of 2008. It expects the economy to grow by 3.3% this year, down from the previous prediction of 3.4%.
The EUR/USD pair rose slightly during the American and Asian sessions. The pair rose from a low of 1.1077 to a high of 1.1095. As shown on the four-hour chart below, the pair has found some support at the current level. The price is slightly above the 14-day and 28-day exponential moving averages. The RSI has moved slightly upwards to the current level of 40 while the momentum indicator has eased. The pair may continue moving lower if it moves below 1.1066.
The GBP/USD pair rose to a high of 1.3013 during the American session. The pair has been moving upwards since yesterday when it reached a low of 1.2960. On the 30-minute chart, the price is between the 38.2% and 23.6% Fibonacci Retracement level. The price is slightly above the 14-day and 28-day exponential moving averages while the RSI has been moving higher. The pair may move further up ahead of the UK employment data.
The USD/JPY pair declined today after the rates decision by the BOJ. The pair moved to an intraday low of 109.90, which is slightly below the 14-day and 28-day exponential moving averages. The RSI has dropped to the oversold low of 30 while the average true range has risen. The pair may remain in a holding pattern today as the market digests the BOJ rates statement.