As the Christmas holidays approach, financial and FX markets are slowing to a crawl. Most of the major currencies, including the US Dollar, the Japanese Yen and the Euro are seeing relatively light trading. Analysts, however, expect that some FX players will be putting in their bids for a stronger greenback in the coming year given the Federal Reserve’s recent rate increase and the likelihood for several more in 2016. At the same time, the Bank of Japan is keen on more easing to stimulate a stagnant economy. Late last week, the Bank of Japan had “fine tuned” its QE program but FX traders, for all intents and purposes, had already priced in just such a move.
As reported at 9:30 am (GMT) in London, the EUR/USD was trading at $1.0961, a gain of 0.50% and just off the session peak of $1.0966. The USD/JPY was trading at lower at 120.3260 Yen, down 0.50%; the pair has ranged from 120.2880 Yen to 120.9790 Yen in today’s trading. The EUR/JPY has been edging just higher at 131.8520 Yen, a loss of 0.03%.
Japan’s Inflation Data Could Sink Yen
Later today, Japan will be releasing personal inflation data. The Bank of Japan has an inflation target of 2% but analysts’ have little hope that that will be met anytime soon given the fall in energy prices and the drop in Japanese consumer spending. The BOJ’s own outlook calls for reaching the inflation target late next year, but many analysts don’t believe that is achievable. Expectations are high that the BOJ will be compelled to continue to expand its QE program which will result in further depreciation of the Yen.