The dollar index has stabilised around the level of 100.50 in anticipation of the Trump and Japanese Prime Minister Shinzo Abe meeting. The main themes of this discussion will mainly be defence and trade possibilities. There was feeble economic recovery seen in late December, which means early this year could be stifled by Trump protectionist policies. An outcome of the meeting will help to clear up BoJ’s next action that is already on the brink of depleting its means in the fight for consumer inflation and economic growth.
Minutes from the BoJ last meeting show a little optimism. On the one hand, rising Oil pushed inflation higher, as well as fiscal help and extensive easing from other the Central Banks, but on the other hand, the economy risks to derail if Japanese products lose its main market. BoJ can forget about the two percent inflation target if Trump and Abe can’t come to an agreement making USD/JPY lose steam. The uncertainty surrounding the forthcoming meeting along with the open Trump charges in Yen manipulation could spark a bullish sentiment on the Japanese currency. Buying Yen after the bullish pullback of the USD/JPY to a level of 113.10-113.20 looks like a reasonable point of entry.
The EU Stock markets are relatively calm. The European indices moved slightly upward, including the French CAC 40, which posted a two percent slump since early days of January due to the growth of nationalist sentiments in the country, as well as, the possible threat of ultra-right forces coming into power. The index can speed up the fall putting pressure on the European currency, which still can not determine its direction. On the one hand, the ECB depletion signs in support of the economy attracts buyers, on the other hand, they are deterred by the threat of gradual disintegration of the European Union. French elections will be held on the 23rd of April and until then the dynamics of the Euro may hugely depend on the results of the pre-election polls.
Oil prices deepen the plunge, due to the growth of the US inventories doubling expectations. The WTI approached $51 a barrel, as bullish plays of the commodities are not in favour this time around. The sharp drop in prices after the OPEC production cuts may indicate that the prices are running ahead of themselves and the further increase will only increase the gap between their fundamentally justified levels.
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