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Yen Plummets as BOJ Leaves YCC Unchanged

After weeks of turmoil in the bonds market, the Bank of Japan left its yield control measures unchanged overnight, sending the yen crashing around 2.75% against the greenback. BOJ’s decision will likely heap more pressure on Kuroda’s successor to end Japan’s 20-year experiment.

Chart: USD/JPY

Key Factors for Today:

• BOJ’s no-change stance sends the yen crashing


• Pound moves up on jobs data as they point to inflation


• WTI breaks the $80 handle again after OPEC’s monthly report


• Euro turns lower following reports ECB might slow down soon

No changes from BOJ

As expected, the BOJ meeting didn’t change policy, so there were no surprises in the penultimate meeting to be chaired by Kuroda, contrary to rumours of a YCC adjustment. In the aftermath, the yen plunged against its counterparts as the BOJ’s decision appears to have set the bank up for a battleground against the market. USD/JPY managed to stage an impressive rally from a low of 128.25 to a high of 131.50, but prices waned a bit on Wednesday.

UK jobs disappoint but add upward pressure

UK jobless claims rose at a higher rate than expected. The ILO unemployment rate remained steady at 3.7% and the claimant count rate ticked up by a decimal. Average earnings rose incl. Since the pandemic, the bonus figure has increased the most, making investors a little excited that the BOE will have to keep hiking. Cable was able to move 0.60% higher to a 1-month high of $1.23, with the next resistance at the peak of $1.2448. The pair has support at $1.2190.

Crude logged eighth consecutive gain

The OPEC monthly report said that global momentum was stronger last quarter than previously anticipated but maintained its production and demand outlook for 2023. China’s Energy Bureau reported a +3.6% growth in power consumption last year, and WTI 3.40% higher to recapture the $80/bbl stronghold. $83.40/bbl is the next major level bulls could eye, with a break below the base opening the door to $78.75/bbl.

ECB could moderate in March

A sources report circulated that the ECB was considering just a 25bps hike in March after hiking by 50bps in February. Euro was weaker on the implication that the ECB was slowing down tightening, ending Tuesday 0.20% lower. $1.0868 is short-term resistance, and $1.0735 is support.

US manufacturing figures lagged

Jan Empire Manufacturing came in well below expectations and at the lowest level since May 2020, in the middle of the covid crisis. The report came on the heels of press circulating that Microsoft was finalising plans to cut around 11K jobs or about 5% of its workforce.

Freeport LNG Terminal might be back online soon

Reports suggested that the LNG export terminal in Texas was starting operations earlier than expected. It was scheduled to resume operations later in February. US natural gas prices spiked around 2.50% on Tuesday, as it implied more exports to Europe, but gave up gains quickly for a red session, but it remains in a tight range with a breakout imminent.

On the docket

• UK and EU Inflation


• US Retail Sales and PPI


• Fed Bostic, Bullard and Logan speeches


• WTI Oil API weekly report

FX 1-day relative performance (USD)

• Yen plummets 2.27% against greenback, Nikkei 7.43% up


• Kiwi remains best performer with 0.45% compared to USD


• Loonie, cable, euro nearly unchanged against dollar


• Franc and Aussie 0.15% down and up vs greenback


• Silver 0.13% up, but gold 0.36% down


• Crude and brent 1.43% and 0.87% higher

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