JPY better bid as BoJ is expected to re-think its QE program
The week gets off to a slow start as investors continue to focus on trade war developments. Donald Trump did not just sit around over the weekend. Indeed, beside the fact that he showed no sign of backing down in its trade rhetoric with China and Europe, President Trump responded violently to Iranian President Rouhani in an all-caps tweet. Market participants appeared to be not too concerned about rapid escalation in rhetoric. After all, the market is used to Trump’s sense of exaggeration. Last summer, he promised “fire and fury” to North Korea, a year later Kim and Donald are best friends and North Korea has not shut down nuclear production yet.
Within the G10 complex, the Japanese yen rose the most against the USD with USD/JPY easing to 110.75, the lowest level since July 11th. Over the last two days, the yen appreciated more than 2% amid rumours that the BoJ is considering modifications to quantitative easing programme. Indeed, Kuroda has promised that the 2% inflation target would be hit by 2015… USD/JPY bounced back on the 110.77 support (low from July 11th) and consolidated around 111. On the downside, the low from July 4th (110.28) will act as next support. The Swiss franc also resisted quite well as USD/CHF slid to 0.9915.
Oil paves the way for a third weekly loss amid oversupply concerns
Rising on Friday due to an OPEC report mentioning that the organization will reduce exports for the month of August, Brent crude and West Texas Intermediate (WTI) closed the week at USD 73.07 and 70.46 respectively amid easing concerns of oversupply in the marketplace. However, the trend is changing now, as crude oil prices are on track for a third weekly loss.
Indeed, as G20 Finance Ministers warn of downside risk on global growth due to imposing tariffs from both US and China side, fears of lower oil demand is rising. US oil rigs targeting declined most since March 2018, thus strengthening the tendency of lower demand from the world’s largest oil users.
Trading below the highs of June, both oil benchmarks as well as other commodity prices are expected to be driven by geopolitics, which is not going to reduce, following Trump’s threats towards Iran and tariffs on all USD 500 billion of Chinese imports.
Currently declining due to further concerns, WTI is trading at 68.14, approaching the 67.95 range. Brent crude futures in Europe and Shanghai Crude trade at USD 73.05 and CNY 491.70 respectively and are heading along USD 73.25 and CNY 495.
