Market Update – January 18 – BOJ Sticks to Accommodative Policy – YEN Dives

BOJ keeps YCC policy unchanged, Kuroda  “will not hesitate to increase easing if necessary”. DOVISH !! – Downgraded economic forecasts – Growth 2023 –  1.7% vs. 1.9% & 2024 1.1% vs. 1.5%. Inflation forecast raised to 1.8% vs. 1.6%. YEN tanked (USDJPY +2.6% at one point). Bonds rallied, the 10-yr JGB dropped to 0.36% from 0.52%  yesterday. US Stock markets were mixed (DOW -1.14%, Nasdaq +0.14%) as Goldman Sachs Earnings disappointed. Asia markets and European FUTS also mixed. UK CPI confirmed at 10.5% (CORE CPI 6.3%)down from 10.7% in November but still at 40-year highs.

The USD Index recovered from under 102.00 at 101.70, to 102.60 following BoJ, back to 102.10 now.   
EUR – holds back over 1.0800, following 1.0760 lows earlier and a rejection of this weeks high at 1.0870. 
JPY – Lows on Monday were 127.20 as speculation peaked, the Dovish “no change” outlook from Kuroda  took the pair to 131.60 highs today. Back to 130.25 now.
GBP – Sterling has breached 1.2300, following the CPI data and currently trades at 1.2325, a 23-day high. 
Stocks – The US markets were weak into close (-1.14% to +0.14%). Mixed news from Banks –  GS -6.44%, MS +5.91%, TSLA +7.43%, RBLX +11.77% US500 FUTS trade at 4017.

USOil – rallied again to test $81.00 following inventories and 2023 outlook upgrades.
Gold – declined from $1930 highs on Monday to test $1900 today as USD lifts. 
BTC – Continues to hold over $20k this week and over $21k again today. 

Today – US Retail Sales, PPI & Industrial Production, Speeches from Fed’s Bostic, Bullard, Harker & Logan,. Earnings – Charles Schwab, Prologis & Kinder Morgan.

Biggest FX Mover @ (07:30 GMT) NZDJPY (+2.71%). Bounced from a test of 81.00 zone on Friday and adds to gains today at 84.80 highs. Following the Dovish BOJ. MAs aligned higher, MACD histogram & signal line positive & rising. RSI 75.36, OB & rising, H1 ATR 0.354, Daily ATR 1.301.

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Stuart Cowell

Head Market Analyst

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