2016-10-31 12:40:47

Last Friday strong US macro-economic data was released, which showed that the US economy in Q3 has grown at the fastest pace in two years.

US Commerce Department reported that with the adjustment for inflation and seasonal factors US GDP in Q3 has grown by 2.9% on annual basis against the forecast of + 2.5%. Concerns about slowing down economy have dropped in the short term. The data showed that the US consumer spending has increased, as well as the private investments and exports. Strong data will give ground for the decision to raise interest rate; however it may take place only in December, as it is unlikely that the Fed will take this step before presidential elections in the US, scheduled for 8 November. Next meeting of the Fed is scheduled for November 1-2.

Positive data on the US GDP had triggered further rise in the USD. However, shortly after the publication of GDP data, the USD started to decline sharply due to the information that FBI has resumed investigation about Hillary Clinton’s emails.

The pair USD/JPY has reached the intraday highs at the level of 105.53 since July 27 but then fell to the lows of 104.46 and closed with the decline by 0.6% at the level of 104.69.

The uncertainty about the US presidential election, the USD dropped against more secure assets and currencies. The ICE index has dropped by 0.6% from the highs of almost 9 months.

Today, the market is in the correction after the strong decline in the USD last Friday, which helped to regain almost all losses sustained during the Asian session.

At the early European session the pair USD/JPY has grown by almost 50 points by the opening of the trading day.

Tomorrow at 06:00 (GMT+3) interest rate decision by the Bank of Japan will become known. It is expected that the Bank will leave the rate at the previous level of -0.1%. In case of the lowering the rate the yen will sharply fall in the foreign exchange market, while Japanese stock market will rise. If the Bank of Japan will not make any drastic decisions, the Yen will continue to strengthen in the market. At the press conference the head of the Bank Mr. Kuroda will shed light on the current economic situation in Japan and future prospects of the monetary policy. Despite the earlier measures to stimulate Japanese economy, inflation in the country remains low, production and consumption are falling, and the price of the Yen is increasing, which have negative impact on Japanese manufacturers.

Earlier Kuroda has repeatedly stated that the Bank is prepared to take the most drastic measures if the need will be. It is expected that during this period volatility will increase in the Asian and global financial markets.USD/JPY: In anticipation of the interest rate decisions.  Fundamental analysis for 31/10/2016