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On October 30th, the Bank of Japan (BOJ) voted 7-2 to keep its short-term interest rate unchanged at 0.5%, with board members Hajime Takada and Naoki Tamura voting against a rate hike. The BOJs inflation expectations remained stable, while economic growth expectations rose moderately, demonstrating its patience in the face of trade and global uncertainties. In explaining their dissent, Takada stated that Japan had "moved out of deflationary norms" and had largely achieved its price stability target, while Tamura pointed out that "upside risks to prices" brought policy closer to a neutral level. However, the majority chose to remain patient, emphasizing the need for clearer confirmation that wage growth and inflation are sustainably aligned. Policymakers described exports and output as stagnant, with consumption remaining robust despite external headwinds. In its quarterly report, the BOJ stated that underlying inflation may stall in the near term amid slowing economic growth but should gradually stabilize to a level consistent with its 2% target for fiscal year 2027. The board considered economic risks to the downside, while inflation risks were broadly balanced. Uncertainty surrounding trade policy and its potential spillover effects on global prices and markets were key risks requiring vigilance.On October 30th, the Bank of Japan (BOJ) paused its interest rate hikes on Thursday but reiterated that it would continue to increase borrowing costs if the economy performs as it expects. As widely anticipated, the BOJ kept its short-term interest rate unchanged at 0.5%. BOJ board members Naoki Tamura and Hajime Takada opposed the decision, reiterating their September recommendation to raise the rate to 0.75%.The Bank of Japan: There are risks to the future trends of exchange rates and import prices, including international commodity prices.Bank of Japan: Trade policies announced so far may trigger a shift in globalization trends.Bank of Japan: It is worth noting that recent fiscal expansion measures, especially in the United States and Europe, may increase global economic risks.

AUD/USD falls approaching 0.7200 despite the former RBA governor's aggressive forecasts

Alina Haynes

Jun 08, 2022 11:59

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Bears and buyers continue to fight for position around 0.7220-25 as sentiment is mixed and investors remain cautious ahead of the week's big data/events. In doing so, the Australian duo struggles to defend the hawkish remarks of former Reserve Bank of Australia (RBA) Governor Ian Macfarlane.

 

Ex-RBA Governor Macfarlane warned early Wednesday morning about chronically rising inflation and the need to drastically increase interest rates. The former policymaker also stated, "There is sufficient scarcity in Australia and the United States to maintain a high inflation rate."

 

In contrast, China's Vice Commerce Minister Wang Shouwen joined China's Vice Finance Minister Zou Jiayi in reiterating concerns about a global economic downturn and a decline in demand. Recent consensus among policymakers held that the rise of global demand is slowing.

 

It's worth noting that a rebound in US Treasury rates and apprehension ahead of Thursday's European Central Bank (ECB) meeting, as well as Friday's US Consumer Price Index (CPI) for May, tend to stifle the AUD/USD pair's movements.

 

In spite of this, 10-year US Treasury note rates jump two basis points (bps) to 2.99 percent the day after breaking a six-day downward trend. A record decline in the US trade deficit and optimism on the US budget appear to have prompted a recall of US Treasury bond sellers. The US trade deficit for April decreased 19.1 percent from the previous day to USD87.1 billion.

 

Other market optimists were defended by US Treasury Secretary Janet Yellen and optimism for a quicker economic rebound in China. Tuesday, US Treasury Secretary Yellen spoke before the Senate Finance Committee about the Fiscal Year 2023 Budget while stating that the US economy faced problems from "unsustainable levels of inflation" and supply chain disruptions. The official said, "An adequate budget is necessary to support the Fed's efforts to control inflation without damaging the labor market."

 

It should be noted that World Bank (WB) President David Malpass's warning that faster-than-anticipated tightening might force certain nations into a debt crisis akin to that of the 1980s appears to have impacted on the quotation as of late. The risk-negative news from Ukraine may follow a similar trajectory. Politico reported that Ukraine has not yet achieved a deal with Russia or Turkey to enable the safe passage of its grain ships in the Black Sea, casting doubt on a U.N. initiative to build a crucial food corridor.

Technical Evaluation

A two-week-old support line protects AUD/USD buyers at 0.7205. However, the 200-day moving average and the recent top, located around 0.7255 and 0.7285, may challenge the Aussie pair's upside before the bulls regain control.


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