“Unless the outcome contains a major negative surprise, the underlying firm tone of the dollar is expected to be sustained, as the market is now betting on continued interest rate hikes in the US.”
“Any bad trade balance figures could raise speculation that the trade imbalance will be discussed at the forthcoming meeting of G-8 finance ministers.”
“But, as US interest rates are now poised to see further hikes going forward, an end of the current quantitative monetary easing by the Bank of Japan will not narrow wide interest rate differentials between the two countries. And this interest rate gap should continue to support the dollar.”
“But as the FOMC minutes also indicated that that the US economy still needs additional rate hikes ahead, interest rate differentials will continue to support the greenback.”
“If the Bank of Japan decides not to end [its present policy] this week, that may create the impression that the Bank of Japan is surrendering to political pressure and add some additional downward pressure to the yen.”
“If the headline [CPI] number fails to meet the consensus view, players are likely to rush to unwind huge long positions on the yen which they had built recently on expectations of an early end of the super-loose monetary policy.”
