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Markets traded in a tight price range during the Asian session, with the lacklustre ranges due to traders not taking positioning ahead of this afternoons US data dump and holidays in mainland China and Australia today.
Major FX is stuck in a tight price range, while futures markets are flat are the major indices in the United States staged a late bounce back yesterday, with the S&P500 close to the best levels of the year.
Hong Kong markets reopened after the five-day long weekend for Lunar New Year celebrations. HK equities jumped higher. As I post Hong Kong’s Hang Seng index is up around 1.7% and the Hang Seng Tech Index +2.4%.
The Nikkei 225 and TOPIX are mostly flat, with the USDJPY pair also trading sideways. Earlier today we had the ‘Summary of Opinions’ published by the Bank of Japan from its January monetary policy meeting.
The man points showed a cautious mood with the Summary of Opinions stating, “it’s appropriate to maintain current monetary easing including YCC” and “the BoJ must keep yields from rising across the curve.”
Importantly the Summary of Opinions said that “more time is needed to assess the impact of the December move” and they “must continue to point out to markets that it’ll take time to hit the inflation target”.
Two comments struck from today which were “a policy review must be undertaken at some point, but for now loose policy is needed” and “Japan CPI is expected to slow its pace of rise in H2 of the next fiscal year.”
Interestingly, investment bank Goldman Sachs has been out with its new forecast for the USDJPY pair. The investment bank says Goldman Sachs “While the BOJ’s apparent flexibility on the current policy stance has shifted the balance of risks in favour of further Yen strength, the combination of no imminent exit from YCC and our more constructive view on US growth for 2023 relative to consensus fears of a recession should allow the Dollar to hold its ground against the Yen in the near-term,” GS notes.
They also say, “Taken together, we see less scope for Yen depreciation in the short-term and have pulled forward the timing of appreciation, revising our USDJPY forecast path to 132, 125, 125 in 3 months, 6 months and 12 months”.
