ATF Trading Room

Dec. 8, 2017 (Tempus Inc.) - The U.S. Dollar improved once again this week based on positive global market sentiment and the passing of a two-week agreement that avoids a government shutdown.

USD

The outlook of congressional consensus on a spending bill remains a concern, but investors welcomed the relief. Per the Bloomberg Dollar Spot Index, the “buck” has gained for a fifth consecutive day, its best appreciating streak since March.

Non-Farm Payroll figures revealed an expansion of 228K jobs, exceeding expectations of 195K. Nevertheless, the overall bag of data this morning came in mixed as Average Hourly Earnings managed to grow by just 0.2% instead of the estimated 0.3%. Wage growth is imperative for an optimistic economic outlook and revised October numbers surprised with a contraction. Unemployment stayed put at 4.1%. The greenback is seesawing as markets react.

EUR

The Euro is trading in lower ranges as good news overnight for the U.S. hurt the shared currency. Equity markets rallying also diminished the Euro’s role as a safe-haven.

Additionally, Industrial Production numbers in Germany came in much lower than predicted with 0.9% growth when economists calculated 1.4%. It is likely the currency will stay quite sensitive to changes in other regions with data already a negative factor leading towards depreciation last seen in over two weeks.

GBP

The Pound saw a lot of up-then-down action overnight with a Brexit breakthrough which now points to advancements in the historic negotiations. Prime Minister Theresa May achieved a deal with European Union officials that puts to rest concerns over an Irish border, a final bill, and the protection of rights of EU citizens within Britain. Basically, the PM decided the best route to end deadlock in talks was to follow a path towards a very soft Brexit.

“Leave” campaign political heads seemed highly dissatisfied while stock markets flourished. It seems like the domestic political instability remains a downside risk for Sterling as well as the unknowns regarding a future with less access to European markets. Progress in talks originally boosted GBP, but the doubts and uncertainties that cloud the situation prevented further gains.


USA 

Nov. 24, 2017 (by Zach Pandl & KT Trivedi, Goldman Sachs) - The Goldman Sachs co-heads of FX Research Zach Pandl & KT Trivedi outline their views as we head into year end. In short: they believe that EUR weakness can continue and UK political risks may still weigh on GBP while NZD pessimism is overdone. Here is their latest research note:

1. Counter-trend Euro weakness can continue a bit longer. Over the past two months, EUR/USD has declined about 3.5%, from a high of just over 1.20 to 1.16 today. We see three main drivers behind the move: (1) open-ended bond purchases by the ECB, which look likely to continue longer than investors had expected, (2) the nomination of Governor Powell for Fed Chair, a candidate likely supportive of continued funds rate increases, in contrast to expectations in late summer that the White House would opt for a more dovish choice, and (3) further progress in the US Congress on tax reform. While the first two catalysts have played out, we expect that Congressional Republicans will continue to move the tax reform ball down the legislative field over the next month. Moreover, investor positioning still appears long EUR. In futures, for example, aggregate USD positioning has swung from a short of $20bn in late September to a short of $4bn as of last week. However, much of this move was against currencies other than the Euro: futures length in EUR has declined by just $3bn over this period, and net length of +$10bn remains close to multi-year highs. Over the medium term, the Euro probably has more upside than downside, but we think the near-term trajectory is still lower, and are sticking with our year-end target of 1.15.

 

2. A sharper bout of political pressure in MXN, ZAR and TRY than we anticipated. The drawdown in FX and local rates in these high-yielding markets over the past few weeks has been sharper than the bumpier ride we expected, even taking into account the well-flagged risks from a core-rates selloff. In effect, idiosyncratic political risks have returned with a vengeance in each case, overshadowing any improving macro developments: renewed noises of a US pull-out of NAFTA, in turn giving further impetus to local populism, has pushed $/MXN back above 19; the continued divisions within the ruling ANC and the resultant fiscal slippage and potential for rating downgrades have sent $/ZAR back above 14; and $/TRY is above 3.80 as tensions between Turkey and the US, as well as Germany, show few signs of de-escalating quickly. At these levels, each of these currencies is significantly undervalued again on our GSDEER and GSFEER metrics (roughly by more than 15%), and this is reflected in our constructive 12-month forecasts. But unlocking that value typically requires a long investment horizon and some resolution, or at least de-escalation, in these political risks. The upcoming ANC party election in December is at least a concrete binary or potentially ternary event that could provide some clarity on political and economic direction in South Africa, whereas in the other two cases, we are unlikely to have much clarity until well into next year.

 

3. But, over the longer run, macro adjustments supporting EM FX continue and the risk-reward looks attractive for the BRL. The broader case for EM FX is still solid in our view – most EMs have significantly improved external balances and cyclical macro fundamentals, and this is an asset class with undemanding valuations, a generous level of real carry and exposure to the synchronised growth recovery across the EM world. Even in the three economies – South Africa, Mexico and Turkey – that have lagged other EM high-yielders in correcting external imbalances and raising real rates to bring inflation under control, some adjustments, warts and all, have been taking place. In South Africa, core inflation peaked at the start of the year, and the subsequent declines allowed the SARB to cut rates for the first time in July since 2012. In Mexico as well, core inflation looks to have peaked in August, and the non-oil trade balance is in surplus. Turkey has seen a much more moderate correction of its external imbalance relative to Mexico and South Africa, and still has core inflation moving higher, although our economists expect it to peak in the next couple of months. But the tension between improving macro and political uncertainty is most acute in the BRL as the currency has sold off on the back of falling expectations of pension reform. While that is clearly a setback for the fiscal picture, the external balance and inflation profile in Brazil are unquestionably better – in 2017Q2 Brazil recorded its first current account surplus since 2007Q2 and core inflation was comfortably below the 4.5% target. So, with $/BRL back above 3.25, the risk-reward of owning BRL looks attractive as long as there is at least some prospect of modest progress on fiscal reform.

 

4. Bank recapitalisation an additional positive argument for INR. Just as this latest bout of pressure on EM FX was getting underway, we argued that INR and IDR were good candidates to fade any selloff even if the eventual upside was more limited because the fundamental backdrop was still solid, and the revealed aversion of the RBI and BI to large spikes in the respective currencies and ample reserves meant that the bumpier path in these currencies would be less bumpy than other high-yielding alternatives (see EM FX viewsPressure now, value beyond, 29 Sept 2017). Since then, the announced bank recapitalisation in India has bolstered the supportive case for the INR further. Whereas much of the market focus has been on the negative fiscal implications of the recapitalisation effort, our economists have highlighted that the impact on economic growth from a re-energised public sector bank credit impulse could easily exceed a few percentage points. With that type of growth upside, flows into Indian equities and the INR should remain well-supported in the medium term, and we see risks to our 3-month $/INR forecast of 64 tilted towards further INR strength. In the case of IDR, the heavy positioning of foreign investors in local bonds is often a source of vulnerability, but as Danny Suwanaprutihas argued, if Indonesia is included in the Global Aggregate Index, which looks likely, it could catalyse further capital inflow in 2018.

 

5. PEN: A positive carry mid-yielder for volatile times in EM FX. We have described CLP and PEN as the hare and the tortoise of Andean FX. Both are attractive currencies among EM mid-yielders with supportive macro fundamentals. But, whereas CLP has rallied hard in recent months (even taking into account the recent selloff), the PEN has lagged. From current levels CLP is becoming a less obvious “value” story. Still, there is potential for positive surprises in the cyclical picture and a market-friendly outcome in the upcoming elections could be a positive catalyst. So there is some scope for modest spot appreciation, although with copper prices already having risen so much, the move towards our 12-month forecast for $/CLP of 615 is likely to be choppier. The PEN looks more compelling from a valuation standpoint, has a higher nominal carry (of around 2%) and we are optimistic on the medium-term growth outlook as cyclical headwinds fade. Given the heavy intervention in FX market, we expect any move towards our 12-month $/PEN forecast of 3.15 to be slow and steady, but then in volatile times for EM FX, that is an attractive feature rather than a bug.

 

6. Monetary policy is unlikely to pressure the Pound, but politics might. Markets saw a relatively dovish signal in the BoE’s rate decision last week, as the Bank no longer said that policy needs to be tightened “by a somewhat greater extent over the forecast period than current market expectations”. However, we read the accompanying Inflation Report (IR) as saying the Bank remains in tightening mode (albeit at a very slow pace). Conditional on current market pricing, CPI inflation in the IR does not converge fully back to the Bank’s 2% target even by the end of 2020 (it sits just above at 2.15%)—which, taken literally, means that a higher policy rate path would be desirable. This point also came across in Governor Carney’s press conference, where he noted: “…we, in fact, need those two additional rate increases in order to get that return of inflation to target. In fact, if you look closely at the forecast, inflation approaches the target, it doesn’t quite get there, and the economy is likely to be in a position of excess demand, in other words, running a little hot at that point”. So we do not think the BoE gave an all clear for going long EUR/GBP. We ultimately expect more Sterling weakness, but surprises from the increasingly messy political environment are more likely catalysts than new dovish signals from the BoE.

 

7. Lastly, we still see downside to AUD/NZD. In our view, election-related pessimism around NZD looks overdone. First, in our view, yesterday’s announced Review of the RBNZ Act recommending a shift to a dual mandate (inclusive of “full employment”) is more of a reinforcement of the existing “flexible inflation targeting” status quo rather than a material regime shift. Second, most forecasters—including ourselves and the RBNZ—already assume a slowing in net migration, so policy changes under the new coalition government may not introduce much more downside risk. Third, politics aside, the New Zealand economy is in solid shape: last week we learned that labour market activity was firm in Q3, and the level of output already looks to close to its potential. Rate increases still look some way off, but the NZD is unlikely to remain depressed given the economy’s healthy cyclical backdrop.

Nov. 22, 2017 (Tempus Inc.) –  The U.S. Dollar remains quiet ahead of the Thanksgiving holiday, even after the release of Durable Goods Orders.

USD

The figures surprised as the indicator was expected to show a 0.3% expansion, instead contracting by (-1.2%). When transportation costs are excluded, a 0.4% increase was registered, but this still fell below expectations of 0.5% for October.

The saving grace may be the revision of September’s numbers where the expansion was thought of being at 0.7%, but came in upgraded at 1.1% Overall; this piece of data has lacked consistency over the year and may not be as influential as we close the year.

The FOMC Minutes are scheduled for 2PM, but we see little if any reaction as the Fed’s move towards hiking is very much determined and priced-in. Tempus will be closed Thursday in observance of Thanksgiving and will be open again on Friday.

EUR

The Euro continues to swim in relatively calm waters after Monday’s half-percent decline based on worries in German political stability. At the moment, Chancellor Angela Merkel would not refuse to have another snap election in order to gain seats and have an easier time forming an alliance.

However, headlines overnight saw the prospect of another vote as worrisome, but welcomed the idea of forming a “grand coalition” with the Social Democrats, a party usually aligned with Merkel’s goals, but that suffered bigly on election day and blamed her platform for the failure. We shall see if downside risks manifest themselves into further depreciation, but for now Euro is not paying any heavy tolls.

GBP

The Pound’s recent gains have been subdued slightly due to concerns over Brexit and its symptoms affecting the economic outlook. Later today, the Chancellor of the Exchequer, Philip Hammond, will present a new budget and his remarks may provide guidance the state of affairs. PM Theresa May is just hoping that the EU embraces new talks and the idea of being paid an agreed final bill amount.

Orders in the UK are up to their best level in 30 years per a survey by the Confederation of British Industry. This mix of good economic data and bad news on the Brexit front are likely to dominate the Sterling environment for what’s left of the year and beyond.

 

Aug. 4, 2017 (Tempus, Inc.) – The U.S. looked to today’s economic docket to help stop its recent bleeding.  The Bloomberg Dollar Index fell for its fifth conservative month in July, its longest losing streak since 2011.  The same index is set for its 4th straight weekly decline as political risks have weighed on the greenback.  Yesterday, the news broke that Special Counsel Robert Mueller has convened a grand jury in Washington DC as the Russian tampering investigation continues to ramp up.  The dollar fell sharply as the headline hit the wire but quickly regained most of those losses.

The dollar is indeed rallying in early trading after jobs data impressed. Employers added 209K workers in the month of July, beating expectations of a 180K.  Last month’s print was also upwardly revised by 9K. The unemployment rate held at 4.3%.  A further breakdown of the data showed that average hourly earnings rose 0.3% month over month, after a 0.2% gain in June.  The uptick in earnings could help spur consumption, which is 70% of the American economy, and sustain growth.

The average jobs pace since January this year is 179K a month, still under that average of 187K a month last year.

EUR

The Euro remains elevated and within striking distance of it 20-month high against the U.S. dollar.  A day after German PMI gave traders cause for concern over the health of Europe’s largest economy, today’s data shows the PMI scare may be a one-off.  German factory orders for June rose 1.0% month over month, doubling expectations.

GBP

The British pound floated in no-man’s land overnight as traders continue to digest yesterday’s Bank of England meeting.  The central bank held its benchmark interest rate unchanged, which was widely expected.  However, they did downgrade their economic outlook for the remainder of the year and next in the face of Brexit challenges.  The sterling sold-off during yesterday’s session and looks to do the same today following better-than-expected U.S. jobs data.

 

July 21, 2017 (Tempus, Inc.) – The beleaguered U.S. dollar was unable to stage a meaningful comeback overnight after taking heavy losses during yesterday’s sessions.  The dollar has been hampered recently by slowing economic indicators and the failure of the U.S. government to pass any meaningful legislation which casts doubt on the ability to eventually pass pro-dollar initiatives like infrastructure spending or tax reform.

The straw that broke the dollar’s back came yesterday as Bloomberg News broke a story that claimed special prosecutor Robert Mueller has expanded his Russia investigation to include President Trump and his business associate’s business dealings from even before the President had serious political aspirations.   As the story broke, the U.S. Spot Dollar Index fell off a cliff and the greenback sunk to a 2.5 year low against the Euro.

Yesterday’s data was also disappointing with the Philly Fed manufacturing index falling.  There is no major economic data or Fed speakers scheduled for today.  Therefore, the dollar will hope to avoid new Russia headlines and head to the weekend licking its wounds.

EUR

The Euro was a train barreling down the tracks during yesterday’s session despite mostly dovish commentary from ECB President Mario Draghi.  The European Central Bank left interest rates unchanged, which was widely expected.  In a press conference following the decision, the central bank head reiterated that the bank’s easy monetary policy is still appropriate, throwing cold water on speculation that the ECB is close to tightening policy.

Nonetheless, the common currency benefited from breaking Trump/Russia news on the other side of the pond.  The Euro rallied and broke technical levels of the May 2016 high.  The Euro’s run ended with the currency at its strongest level since January 2015 against the U.S. dollar.

AUD

The Australian dollar was one of the only major currencies that failed to rise against the besieged greenback.  Reserve bank of Australia Deputy Guy Debelle said in a speech today that just because an increase in other central bank’s policy rates doesn’t “automatically mean” that rates in Australia need to rise. Aussie OIS show traders are now only pricing in a 20% chance of a rate hike by December of this year, down from 33% yesterday.

The Aussie rallied early in the week after minutes from the RBA’s July meeting suggested growth is picking up.  The currency has since given up some of those gains.

July 20, 2017 (Tempus, Inc.) – The U.S. Dollar is trading in wild ranges this morning as markets react to the European Central Bank’s decision to delay any monetary policy tightening. Shockingly, the Euro is up as ECB President Mario Draghi is explaining that QE will not be changed and that officials are still committed to expanding and extending the program as needed, yet none of this is having a negative effect.

In fact, he admits that inflation is dragging, but feels very confident on the strength of the economic recovery. Basically, it looks like Draghi and other members felt the fall will provide all the necessary data and analysis that provide enough confidence to act on increasing interest rates without jeopardizing the progress being made.

Overall though, the U.S. Dollar is faring better across the board with positivity built from good housing numbers. The greenback also was not affected tremendously by the Bank of Japan’s announcement in which they upgraded their GDP forecasts, but lowered their inflation expectations, again. It seems like tapering of easing measures will happen everywhere, but in Japan.

EUR

The Euro is trading in wild ranges, swinging within a 75-point range as markets gauge the ECB’s thinking. As expected, rates were not changed, but there seems to be a counterintuitive correlation between the dovish tone of delaying action and the Euro appreciation we are seeing. ECB’s Draghi sounds very cautious yet optimistic.

Furthermore, he said that tighter financing conditions are “the last thing” the ECB wants. As we interpret it, the Euro deserves credit and its value reflects the lack of political calamity that once seemed possible for the continent as well as the economic strengthening that has spread beyond Germany. The ECB just wants to keep enjoying the show and go on vacation.

GBP

The Pound weakened by over half a percent following a lack of agreement on the amount the UK must pay the EU with a now very intense French delegate’s demand that they pay big time. Prime Minister Theresa May is already under a lot of pressure, but now she must explain to Parliament that the EU is serious about payment of obligations before any trade deals is possible.

Bruno Le Maire, France’s Finance Minister, even went as far as quoting former British Prime Minister Margaret Thatcher in saying, “We want our money back.” The tensions play poorly for a Brexit team struggling to have a cohesive message in the face of EU lawmakers ready to make the divorce proceedings punitive.

 

Apr. 7, 2017 (Tempus, Inc.) – Global markets across all asset classes experienced heightened volatility as news broke that the U.S. launched a missile attack on Syria in response to the regime’s chemical attack on his own people earlier this week. Global equity markets shot lower and safe-havens, including gold, benefited. The Japanese yen and the Swiss Franc, traditional safe-haven currencies, also found knee-jerk support before reversing most of their gains. The quick reversal shows that markets expect the attack to be an isolated incident. However, the true fallout from the military action is unclear. Russia has already condemned the attacks as act of aggression against a sovereign state. Russia has been propping up the Assad regime in Syria for years and Russian soldiers are currently on the ground in Syria. The attack could also be seen as a warning to North Korea as the U.S. has shown it is willing to act unilaterally against rogue nations. Near-term headline risk and longer-term risk-off potential could spark more volatility.

Despite modestly benefiting from risk aversion trades overnight, the U.S. dollar found resistance this morning following poor jobs numbers. Payrolls rose by only 98K in March, failing to meet an already dismal 180K estimate. Adding insult to injury, last month’s print was also downwardly revised. In addition, wage growth slowed to 2.7% year over year, down from 2.8% in February. Some may see today’s number as an aberration or blame winter weather in March, but nevertheless, the poor reading will pour cold water on future interest rate projections.

Despite the dismal prints, the U.S. dollar has reversed course and is currently gaining across the board.

EUR

The Euro initially climbed overnight, benefiting from strong German industrial orders. However, the common currency has since succumb to general dollar strength and is about three-tenths of a percent weaker. German industrial production unexpectedly rose in February, led by the construction sector. Output rose 2.2%, beating expectations of a 0.2% drop.

GBP

The British pound was initially immune to Syria-related trades. But the currency came under pressure on reports that U.K. manufacturing and construction dropped. Manufacturing declined 0.1%, construction fell by 1.7% and industrial production dropped 0.7%. All of the prints were below expectations.

Mar. 17, 2017 (Tempus, Inc.) – The U.S. Dollar is trading in mixed ranges, mostly negative throughout the week after a more dovish outlook from the Fed and political developments in Europe that eased volatility. It is clear now that the Fed believes the economy is steady and that there are some uncertainties it wants to monitor such as sustainable wage increases and improved consumer spending.

Meanwhile in Europe, indicators have also kept the Euro-bloc on recovery, to a point where the European Central Bank can ease off the gas pedal when it comes to maintaining an accommodative approach. The greenback has weakened and the Bloomberg Dollar Spot Index is now at its lowest level since November 11th.

Treasury Secretary Steve Mnuchin is attending his first G-20 finance ministers meeting where he has already made headlines by working closely with his German counterpart Wolfgang Schaeuble and stating that the U.S. has no intentions of starting a trade war, but will not tolerate manipulation of currency fluctuations for unfair advantage. In terms of data, we’ll see if Industrial Production does anything to aid the “buck” when it’s released at 9:45AM. A 0.2% expansion is expected after it contracted last month.

EUR

The Euro strengthened by 1.3% throughout the week and it’s now at its best level in five weeks. The European Central Bank looks ready to step away from additional quantitative easing and some members are expressing optimism in their ability to hike the benchmark rate before the year ends. At 0.0% for main refinancing and negative overnight deposit rates, the central bank has exhausted its instruments in hopes of consistent growth.

Now that Spain is on the rise and inflation finally arrived, ECB member and governor of the National Bank of Austria Ewald Nowotny has spoken in favor of an end to loose monetary policy. He thinks the right time is now before prices go up too high.

There are downside risks in the horizon, politically especially, but the EUR may stay around current levels with some upside if data continues to impress in the next few months.

GBP

The Pound has rallied almost 2.0% this week bringing it to its strongest level against the dollar since the month started. Prime Minister Theresa May does have the power to invoke Article 50 to initiate the Brexit and polls in Scotland indicate a call for independence from the UK would not be welcome by an overwhelming majority. It would be a very tight race.

However, her determination and confidence could be tested once the process starts because the European side of the equation may not be so easy to solve. Scottish National Party leader and first minister Nicola Sturgeon warns that economic concerns in her nation are only going to be exacerbated if there is no access to the single market. She truly believes Scotland is ready for freedom.

On the monetary policy side of things, the Bank of England surprised us with lack of full consensus on their decision to keep rates unchanged. Kristin Forbes, who is leaving soon, dissented with her vote to hike. Although she may not influence any other meeting again, it looks like tightening is in the minds of more central bank officials than just in the U.S.

 

 

Jan. 27, 2017 (Tempus Inc.) – The U.S. Dollar is currently losing ground against most of its counterparts following disappointing data for the fourth quarter. Gross Domestic Product was expected to grow 2.2%, but instead the figure came at 1.9% making 2016 the worst year for economic growth since 2011. Adding to concerns of a slowdown were Durable Goods which did not expand an estimated 2.5%, but rather contracted at (-0.4%). The numbers are a contradiction to the positive momentum across global markets this week when we’ve witnessed record highs for the Dow Jones, NASDAQ, and S&P along with resurgence in commodities.

In addition to poor data, yesterday’s announcement of plans to build the wall and charge as high as 20.0% tariffs on incoming Mexican products left a nasty taste for economists. This represents a declaration of war on trade and the animosity in regards to Muslim as well as other immigration is fomenting not just uncertainty, but bewilderment. The U.S. Dollar is vulnerable to statements from the current administration as it pertains to global competitiveness, but also its tone in managing established relationships with neighbors and other nations.

JPY

The Yen had a tough week as a result of booming markets and policy divergence. The Bank of Japan will meet next week on January 31st to announce its policy decision, which could bring the currency down further. USD is rising after the BOJ increased its purchases of bonds this week, a sign that they may feel the need to provide an even more accommodative environment. Yen is down 2.3% for this week on the basis of market optimism and gains.

Prime Minister Shinzo Abe has shown fondness of Trump and will be visiting soon at a date note yet determined. It’s possible that with Trump’s interest in bilateral agreements, some framework may come along this year in which the two countries align new trade terms as well as permitting Japan to increase its military capabilities. Now that the U.S. will not pursue the Trans-Pacific Partnership, the country must establish a way to maintain influence and good relations throughout the Pacific, where Japan may prove to be its only true ally.

 

EUR

The Euro was down as a whole for the week, but may recoup all losses by the end of today’s trading session. German confidence was as solid as expected, but more impressive is the lower unemployment rate in Spain, which fell to 18.6%.

Part of the troublesome PIGS (Portugal, Ireland, Greece, and Spain), the Iberian nation has improved its economic prospects practicing fiscal discipline and benefitting from economic pick-up in the region. Although downside risks have kept the Euro in familiar ranges for the last 3 weeks, indicators have been positive and we may face short-lived rallies as we enter February ahead of elections with potential to affect the Euro-bloc in March.

 

Dec. 23, 2016 (Tempus, Inc.) – The U.S. dollar reverted to its status as a traditional safe-haven in recent days as terrorist attacks in Turkey, Switzerland and Germany rattled investors.

The greenback has long benefitted in times or financial or geopolitical chaos for its perceived safety. The dollar also received a boost yesterday when Federal Reserve Chair Janet Yellen expressed optimism that U.S. wages were set to extend gains.

We expect the dollar to continue to take its cues from events abroad. There is a slew of data set for the second half of the week that will help dictate the dollar’s momentum over the last week of the year.

EUR

The Euro came under renewed pressure as geopolitical events are likely to put additional pressure on pro-Europe governments. A truck crashed through a Christmas market in Berlin yesterday, killing 12. German Chancellor Angela Merkel said that the act is “assumed” to be an act of terror. Merkel is up for re-election next year and a terrorist attack on her watch will add to the anti-European party’s arsenal. The rise of populism across the continent has market participants worried and widespread political uncertainty is sure to fan the flames.

JPY

The Japanese yen tumbled more than one percent against the U.S. dollar overnight. As expected, the Bank of Japan kept its policy on hold. Interest rates are currently at -0.1% and the central bank plans to continue to purchase 80 trillion yen of government bonds annually.

The central bank did upgrade its assessment on the overall economy, partly due to a weakening yen. The yen has weakened 11% against the U.S. dollar since the election of Donald Trump on November 6th. A weaker yen will lift import prices and could provide a much-needed boost to inflation.