USD/JPY pops 20 pips on the as expected Fed
- Fed doesn't suppose and Dollar slightly bid.
- BoJ policy is set to remain on hold this week.
USD/JPY is currently trading at 108.32 following the FOMC, travelling between 108.08 and 108.33 but is virtually flat on the day as the Fed lowered rats as expected by 25 basis points.
The Fed funds target rate was lowered to 1.75%-2.00% while the prior Fed funds rate was 2.00%-2.25%. The statement repeated that economic activity is rising at a moderate rate and that the labour market remains strong with inflation running below 2%.
The market was well and truly prepared for the outcome and instead looked to forwarding projections. The 2019 dot plot came down to 1.9% in 2019 and they see 1.9% in 2020 and 2.1% at the end of 2021.
USD/JPY could be headed towards the 105.00 area on a 3 month
Meanwhile, this week the BoJ will hold its regular policy meeting. Speculation is building that although policy is set to remain on hold this week, that the BoJ may be prepared to lower short-term rates further into negative territory in the coming months
"In spite of periodic bouts of safe haven demand for the JPY, the fact that Japan’s effective exchange rate is still trading only modestly above multi-decade lows does imply that the BoJ’s extremely lose policy conditions has had an impact on softening domestic monetary conditions," analysts at Rabobank explained, adding, "That said, in recent months USD/JPY has been biased lower mirroring a reduced level of risk appetite. Given the current geopolitical risks in addition to the slowdown in world growth, we see risk that USD/JPY could be headed towards the 105.00 area on a 3 month view."
USD/JPY levels