The Japanese yen is showing little movement at the start of the week. In Monday’s North American session, USD/JPY is trading at 110.83, up 0.02% on the day. On the release front, the Bank of Japan will announce its interest rate later on Wednesday. The Bank is expected to maintain rates at -0.10%. Investors will be carefully monitoring the Bank’s monetary policy statement. There are no US releases on the schedule. On Tuesday, the US releases the Richmond Manufacturing Index.
The Bank of Japan is not expected to make any dramatic moves at its policy meeting, which concludes on Wednesday. Still, there has been speculation that the BoJ could change its monetary stance and taper its massive stimulus program. The economy showed considerable improvement in 2017, and inflation has moved higher, although it remains well below the BoJ’s target of around 2 percent. Still, the Bank made no change to policy last year, and any moves are likely to be small and incremental. Investors will be combing through the monetary statement, and any hints at a change in policy could have a strong impact on the yen.
It’s Day Three of the US government shutdown, which began Friday at midnight when the Senate failed to approve a short-gap spending bill. Without funding, many non-essential government services have been forced to shut down. Democrats and Republicans are now playing the ‘blame game’ and pointing fingers at who is responsible for the crisis. The Democrats refused to vote for the spending measure until a deal is hammered out over Daca, an program for children who are illegal immigrants that Trump has threatened to deport. Lawmakers are scrambling to reach common ground, and on Sunday, Senate majority leader, Mitch McConnell suggested that he would allow a vote on immigration reform in February if Democrats agree to fund the government. With congressional elections looming, both parties will not want to anger voters, so we could see the crisis resolved this week.
