Morning Brief – BOJ Commentary dominates

The USDJPY pair traded towards the best of the year so far as Bank of Japan (BoJ) Governor nominee Kazuo Ueda addresses the parliament earlier today.

The focus on BOJ talk comes as Ueda provides commentary from the successor of BoJ Governor Haruhiko Kuroda, which has accelerated volatility in the Japanese Yen currency this week.

During the Asian session the EURJPY pair became particularly volatile. Commentary from Europe about more sanction on Russia also dented the single currency.

Ueda said that he has termed the current monetary policy as appropriate and necessary for maintaining 2% inflation, and he further stated that rising inflation in Japan is an outcome of higher import prices.

On domestic demand, he noted that is still absent but the central bank is deploying efforts to achieve pre-pandemic growth levels. The commentary was pretty standard stuff for BOJ members.

Also, Bank of England policymaker Tenreyro will be speaking on inflation later today. Tenreyro is a member of the Bank of England Monetary Policy Committee. She will be speaking on inflation targeting at a conference organised by the Federal Reserve Bank of New York later on Friday, 24 February 2023.

Deutsche Bank also gave commentary on the coming Bank of England meeting, and at present, they think the bank would like to continue with monetary easing and YCC framework though.

They also noted that the central bank have to be mindful of side effects of strong easing measures and said that “with the MPC ascribing to an 18-24 month lag for rate hikes to fully feed through into the real economy much of the pass-through has yet to actually feed through into the economy”.

The German bank also said “While there’s plenty of uncertainty around this estimate, assuming a standard (and linear) 18-24 month lag in monetary policy transmission, we calculate that only 30% of the Bank’s rate hikes have likely already fully fed through into the economy, rising to 75% by the end of the year.”