Bank of Japan expands its monetary stimulus The Bank unexpectedly eased its monetary policy and said that it will conduct money market operations to increase the country’s monetary base to JPY 80 trillion per year from JPY 70 trillion targeted previously. In addition, it will increase its purchases of government debt and extend the average duration to about 7-10 years. The JPY plunged to a six-year low against the dollar while Nikkei surged almost 3% following the announcement. The additional stimulus measures introduced from the Bank are due to worries over weak growth in consumer prices. The move from BoJ is opposite to the Fed’s end of QE this Wednesday, and it could keep JPY under increased selling pressure. On top of that, data released earlier showed that Japan’s unemployment rate ticked up and consumer prices slowed for a second consecutive month, adding to evidence that the BoJ is likely to miss its inflation target.
Elsewhere, the New Zealand dollar strengthened after Chinese authorities lifted a temporary import ban from the New Zealand’s biggest dairy exporter. Following the sharp decline witnessed on Wednesday, high-yielding currencies have regained some lost ground regardless of their central banks attempt to push the currencies down.
As for today’s indicators, German retail sales for September are forecast to fall on a mom basis adding to concerns that the Eurozone’s strongest economy is weakening. Eurozone’s unemployment rate for September is also coming out along with the bloc’s CPI estimate for October. With less than a week before the ECB meeting, the rise in the CPI rate may be a sign that the stimulative measures announced by the ECB in June and September are starting to have some positive impact, although it will clearly take time for all the measures to be enacted and take full effect. On the other hand, the decline in the German inflation rate on Thursday increases the likelihood for a possible below expectations reading in the region’s CPI estimate. This could add to fears that deflation risk in Eurozone hasn’t gone away. What’s more of a concern, is that the ECB’s stress test results released on Sunday did not consider a deflation scenario and the region’s risk of falling into deflation could undermine those results.
In Norway, we get the official unemployment rate for October. The forecast is for the rate to decline a bit, in contrast with the AKU unemployment rate released earlier this week. Following the increase in the AKU unemployment rate and the drop in September’s retail sales, NOK has been under increased selling pressure. If the official unemployment rate comes in line or better than expectations this could strengthen the Norwegian krone somewhat before the bears prevail again.
From Canada, the GDP for August is expected to have remained unchanged from the previous month. This is likely to signal that the economy is struggling for a second successive month and a possible contraction could weigh on the Canadian dollar.
In the US, we get the personal income and personal spending for September. Personal income is expected to rise at the same pace as in August, while personal spending is anticipated to decelerate from the previous month. The nation’s yoy rate of the PCE deflator and core PCE are forecast to remain unchanged, in contrast with the slowdown in the 1st estimate of Q3 core PCE in Thursday’s GDP figures. The Chicago Purchasing managers’ index and the final University of Michigan consumer sentiment, both for October are also due out.
As for the speakers, ECB Governor Luis Maria Linde speaks.