The Japanese yen is lower in Tuesday trade. In the North American session, USD/JPY is trading at 106.38, down 0.15% on the day. In Japan, Flash Manufacturing PMI is expected to improve to 54.3 points. In the US, the current account deficit widened to $128 billion, above the estimate of $125 billion. On the housing front, Existing Home Sales is forecast to rise to 5.41 million. All eyes are on the Federal Reserve, which is expected to raise the benchmark rate to a range of between 1.50% and 1.75%. On Thursday, the US releases unemployment claims.
The Bank of Japan has appointed two new deputy governors, Masayoshi Amamiya and Masazumi Wakatabe, to 5-year terms. On Wednesday, Anamiya said that “conceptually and theoretically, we haven’t hasn’t ruled out the possibility of adjusting the yield curve”, leaving the door open to raising rates even if inflation remains shy of the 2 percent target. However, Anamiya added that the Bank has not reached the point of having to make such a decision. In other words, the bank is planning to maintain its ultra-accommodative policy for the foreseeable future.
The markets are keeping a close eye on the Federal Reserve, which will release a rate statement later in the day. The Fed is expected to raise rates for the first time in 2018, and Fed Chair Jerome Powell will preside as chair of the FOMC for the first time, followed by Powell’s first post-FMOC press conference. The Fed has sounded marginally more hawkish recently – will this trend continue in the rate statement? The Fed rate projection remains at three rates for 2018, but with the US economy continuing to perform well, this forecast could be revised upwards to four rates. If the rate statement is unexpectedly hawkish, the US dollar could respond with gains.
