Japanese Yen Fundamental Forecast: Bullish
Talking Points:
- Japanese Yen[1] faced the North Korea Summit, Fed, ECB and BoJ rate decisions
- With those key event risks now behind us, focus shifts back to trade war worries
- The US is pressing Chinese tariffs, the anti-risk unit stands to gain if stocks fall
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Looking at an average performance of the Japanese Yen against its major peers, the currency experienced a volatile week but was on course to finish it mostly little changed. It first fell as optimism ahead of the Trump/Kim summit lifted sentiment[3]. However, it found itself rising in the aftermath of the Fed and ECB rate decisions later on.
However, its performance towards the end of last week could be a prelude to what is in store next. The Bank of Japan rate decision helped send the Yen cautiously lower, but a deterioration in sentiment on trade war fears[4] beforehand was driving some Asian shares down. During the former, the central bank did not have much to offer as rates were left unchanged and they continued to reiterate the status quo.
Speaking off, the upcoming Japanese inflation report is unlikely to generate much Yen volatility. In general, local economic data tends to have a limited impact on the unit given its relatively minor implications for monetary policy. The one exception is what the BoJ is trying to bolster, CPI data. Even then, Japan’s May inflation data on the 21st
