Friday July 22, 2016 - 22:59:31 GMT
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Trading Focus Turns To Japan And the Yen
John M. Bland, MBA
Abe Stimulus Worry
The focus in the latest week has turned from Brexit to the major economic stimulus plan promised by Japanese PM Abe after a major political gains in the latest elections. One disappointment came when BOJ Governor Kuroda indicated in a BBC Radio documentary broadcast on Thursday. In the interview, Kuroda threw cold water on the idea of "Helicopter Money". "Helicopter Money" is a concept introduced by former Federal Reserve Chairman Ben Bernanke, where the central bank in essence "prints" money to finance government spending to stimulate growth. One concept being proposed for Japan was for the BOJ to purchase perpetual bonds from the government with a zero percent coupon. Thus the government would get the funds in a manner that would not adversely impact the budget. Kuroda said that such a scheme would not be legal.
Traders also started to react negatively to in-depth analyses of PM Abe's major stimulus program. As typically has happened in the past, the actual spending is proving not to be as large as the headlines were suggesting. The Nikkei closed down 231 points on Friday.
Current Trading Conditions
POLL: SHOULD THE UK RESTRICT IMMIGRATION?
The two top currencies, the U.S. dollar and the Euro slipped into the background in the latest week, with this pair trading in a weekly range of only just over one cent. Together, the two dominate trading volume in the forex markets and share the role as reserve currencies. Most of the volatility in the latest week was dominated by thr yen and sterling as dealers focused on what actions the Abe government will be taking to stimulate the sluggish Japanese economy. By the end of the week, there were growing concerns that the program would be inadequate. As for the British pound, a flash post-Brexit PMI report had some speculating the Bank of England will have to take strong action soon to bolster economic growth.
WEEKLY HIGH IMPACT NEWS:
08:00 DE- IFO Survey
00:30 AU- CPI
13:45 US- flash SVC PMI
14:00 US- CB Confidence
14:00 US- New Homes Sales
08:30 GB- GDP
12:30 US- Durable Goods
14:00 US- Pending Homes Sales
14:30 US- Crude
18:00 US- Fed Decision & Presser
07:55 DE- Employment
12:30 US- Weekly Jobless
23:30 JP- CPI
03:00 JP- Bank of Japan
09:00 EZ- GDP, flash HICP
12:30 US- GDP
14:00 US- final U of Mich
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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