USD/JPY is trading quietly in the Tuesday session. In North American trade, the pair is trading at the 112 level. On the release front, there are no Japanese events on the schedule. In the US, CB Consumer Confidence XX . On Wednesday, Bank of Japan Governor Haruhiko Kuroda will address the ECB Forum of Central Bankers in Sintra, Portugal.
The Bank of Japan didn’t stray from its message in the Summary of Opinions from its June policy meeting. Policymakers said that inflation would likely remain at low levels for an extensive period, and the bank’s ultra-loose accommodative policy would stay in place until a stronger economy pushed up prices. The BoJ has been consistent in this message, but is mindful that a stronger Japanese economy has increased speculation that the bank might be planning an exit strategy from its stimulus program. In the summary, board members acknowledged that it was important for the BoJ to clearly communicate to the markets that the bank has no plans withdraw monetary stimulus anytime soon. Lower oil prices have contributed to weak inflation levels in Japan, and Governor Kuroda has reiterated that the BoJ will not tighten policy until inflation moves closer to the bank’s target of 2.0%.
Investors are casting a nervous glance at Thursday, when the US releases Final GDP for the first quarter. Preliminary GDP, which was released in May, came in at 1.2%, and this is the forecast for the upcoming GDP report. Recent economic data has been softer than expected, notably construction and manufacturing reports. US durable goods releases were weak in May. Core Durable Goods broke a streak of two straight declines, but the weak gain of 0.1% missed expectations. Durable Goods declined 1.1%, its sharpest decline since June 2016. The slowdown in orders of business equipment could weigh on second quarter growth. Last week, it was the turn of construction numbers to disappoint, as Housing Starts and Building Permits both missed expectations. Consumer spending has also been softer than expected, and if Final GDP falls short of the modest estimate of 1.2%, the dollar could respond with losses.
