Green light from the G20 should see USDJPY test 100
Comments from the G20 supported renewed USDJPY gains and an eventual break of the key 100 level is in the pipeline. The G20 reiterated the call to avoid competitive devaluations of currencies and said monetary policy should be aimed at domestic price stability. This should be seen as a ‘green light’ for the BoJ to continue its current policy on the grounds that it needs to fight entrenched deflation. Indeed, post-G20, BoJ Govenor Kuroda said the G20 agreement gave him confidence to continue easing. This week FX markets will continue to look for signs of increased investor outflows from Japan – watching Thursday’s weekly securities transactions data closely. In terms of other potential influences on the JPY, we expect US Q1 GDP growth to accelerate to 2.7% q/q saar on Friday; an outcome that should hinder further USDJPY gains.
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BNP Paribas