BoJ puts monetary policy on hold

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The Central Bank of Japan left its monetary policy on hold during its monthly monetary policy meeting held earlier today. Recent economic data has been largely encouraging with the most recent quarterly GDP estimates rising 0.6%, from 0.4% previously. Keeping up the bank’s optimistic view, BoJ Governor Kuroda said that Japan’s economy continues to recover, albeit at a moderate pace. The Bank left its forecasts unchanged and expects inflation to reach the bank’s 2% target in the fiscal year of 2016. But there are ongoing risks due to the slump in international oil prices. However, this risk is likely to fade considering that Crude Oil has been largely trending higher in the recent months and could possibly test as high as up to $70 a barrel before resuming its decline. This should help support the bank to reach its inflation target.

Despite the upbeat view, many economists expect the Bank of Japan to expand its monetary policy easing by or around the October meeting.

The BoJ’s decision to stand aside from making any changes to its monetary policy was largely in line with expectations and the Yen also reacted predictably, strengthening on the news but weakness is expected to set in ahead of the London and the US trading sessions.

The current dip in the Yen crosses are most likely to attract fresh sellers into the market which should see renewed bids on the Yen cross currencies.

BoJ President, Kuroda is expected to hold a press conference shortly which could bring some volatility to the Yen crosses.

In other news, Greece Prime Minister Alexis Tsipras held talks with its French and German counterparts in Riga yesterday but there was no significant breakthrough. The meeting was anyways not expected to see any major outcome. With the Greece government dipping into its reserves at the IMF and veiled attacks that the country could run out of cash soon now abating, the country still needs to get the final 7.2 billion Euros in bailout funds as the month of June will see the country having to meet the deadlines to pay the IMF.

The Euro, single currency managed to stabilize for the most part after the currency saw a sharp decline earlier this week as ECB officials announced front loading the QE purchases in order to make up for the weak low liquidity summer months.

EURUSD was trading at 1.1141 ahead of a busy day which will see the German quarterly GDP data and also the US CPI numbers later in the day. ECB President Mario Draghi is also scheduled to speak later in the day followed by other ECB officials speaking at an event in Portugal, which could put the single currency to intraday risks.

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