Effects of central banks decisions on the Dollar Euro and Yen

Effects of central banks decisions on the Dollar Euro and Yen

Posted on Thursday, July 20 2017 at 12:25 pm GMT+0000

Yen affected by BoJ decisions

The yen weakened against the dollar following the release of the Bank of Japan monetary policy report, Dollar/yen rose slightly to 112.15.

This move may be the beginning of a long downtrend for the Yen, despite the keeping its monetary policy unchanged, the Central Bank delayed again the time-frame for reaching its inflation target of 2%.

The Japanese central bank postponed for the sixth time the time-frame for reaching its inflation target of 2%., and also reduced inflation expectations for the current and next year.

This could signal the extension of the stimulus program to a longer time and of course this has a negative impact on the currency, which is affected by weak demand for safe advertising due to optimism surrounding the stock markets.

A retest of 113.60 can’t be ruled out, and a break of 114.50 is also possible.


Euro correcting after posting a fresh 14-month High

The euro is the biggest beneficiary of dollar’s weakness, despite the correction that started in recent days, but the euro managed to post a fresh 14-month High.

The main driver of this rise is a reduction in the possibility of an additional US interest rate hike this year, while prospects for tightening European monetary policy by reducing the stimulus program, are getting larger.

As expected, no change in monetary policy took place during today’s ECB meeting, as the euro zone is still suffering from weak inflation and serious problems in the labor market and unemployment.

During the press conference Draghi confirmed asset purchases will continue until ECB sees sustained inflation pickup, but his optimism regarding the economy gave the euro a lift.

The current support areas are 1.1450 and 11380, while resistances are outlined at 1.1620 – 1.1700


Dollar fell after weak US data

It became clear that most central banks tend to adopt dovish monetary policies and markets interact positively with that plans. But in the US although the Fed intend to raise interest rates for an additional time this year, but the weak CPI reading, in addition to frail wage growth rates are preventing him, and this is what weakened the Dollar lately.

Let us not forget that failure to repeal and replace Obamacare also adversely affected the Dollar’s performance.

The future course of the Dollar depends heavily on inflation data and wage growth rates but I am not optimistic and I think it is difficult for the greenback to return towards the levels recorded earlier in the year.