USDJPY: Hopes building that Abenomics will be given second wind – MUFG

Sandeep Kanihama FXStreet Contributor

Lee Hardman, Currency Analyst at MUFG, notes that the yen has continued to weaken in the Asian trading session following on from its largest daily decline yesterday since the 31st October 2014.

Key Quotes

“The Upper House election results have fuelled speculation that the government will now significantly boost Abenomics policies heading into the autumn, which had previously helped to weaken the yen. However, our analysts in Tokyo remain sceptical that the government will be able to successfully re-weaken the yen in the current unfavourable external environment. The effectiveness of policy easing measures in Japan is also diminishing as a weight on the yen.

For the yen to re-weaken more materially there would have to be a significant step up in Abenomics policies and not just more of the same that we have seen in recent years. It is in this light that reports this week that former Fed Chairman Bernanke has been meeting with BoJ Governor Kuroda and Prime Minster Abe in Japan are encouraging speculation that the BoJ maybe about to embark on a more aggressive form of monetary easing which could move it further in the direction of “helicopter money” by more closely combining fiscal and monetary policies to support growth and inflation.

A large fiscal stimulus package totalling between JPY10 and 20 trillion is expected to be unveiled soon. Prime Minister Abe has stated he will tell former Fed Chairman Bernanke that he wants to accelerate Japan’s exit from deflation. For the yen to continue to weaken, Japanese policymakers will now have to meet those raised expectations for more decisive policy action.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

EUR/USD holds firm above 1.1900 as US NFP looms

EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage.

GBP/USD remains above nine-day EMA near 1.3650

GBP/USD recovers its recent losses from the previous session, trading around 1.3680 during the European hours on Wednesday. The technical analysis of the daily chart indicates a sustained bullish bias, as the pair trades within an ascending channel pattern.

Gold sticks to gains near $5,050 as focus shifts to US NFP

Gold holds moderate gains near the $5,050 level in the European session on Wednesday, reversing a part of the previous day's modest losses amid dovish US Federal Reserve-inspired US Dollar weakness. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal ahead of the critical US NFP release.

US Nonfarm Payrolls expected to show modest job gains in January

The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls data for January on Wednesday at 13:30 GMT. Investors expect NFP to rise by 70K following the 50K increase recorded in December.

S&P 500 at 7,000 is a valuation test, not a liquidity problem

The rebound from last week’s drawdown never quite shook the sense that it was being supported by borrowed conviction. The S&P 500 once again tested near the 7,000 level (6,986 as the high watermark) and failed, despite a macro backdrop that would normally be interpreted as supportive of risk.

Bitcoin price slips below $67,000 ahead of US Nonfarm Payrolls data

Bitcoin price extends losses, and trades below the lower consolidating boundary at $67,300 at the time of writing. A firm close below this level could trigger a deeper correction for BTC. Despite the weakness in price action, institutional demand shows signs of support, recording mild inflows in ETFs so far this week.