Trading action in financial markets on Friday remains choppy as trading conditions stay thin following the Christmas break. The US economic calendar will feature preliminary Goods Trade Balance and Wholesale Inventories data for November. Wall Street’s main indexes closed little changed on Thursday, and the US Dollar Index ended the day flat above 108.00. US stock index futures trade in negative territory on Friday, reflecting a cautious mood. The US Department of Labor reported that weekly Initial Jobless Claims decreased slightly to 219,000 in the week ending December 21.
The US Dollar was the strongest against the Japanese Yen this week, with a percentage change of 0.90%. The EUR, GBP, CAD, AUD, NZD, and CHF all saw changes against the USD, with the EUR registering a -0.23% change, and the CHF seeing a -0.83% change. The heat map shows percentage changes of major currencies against each other, with the USD acting as the base currency and others as quote currencies. During Asian trading hours, Japan’s Tokyo Consumer Price Index rose 3% on a yearly basis in December, with USD/JPY reaching its strongest level since mid-July above 158.00 late Thursday.
GBP/USD registered small losses on Thursday but managed to stabilize above 1.2500 early Friday. Gold edged higher on Thursday, gaining more than 0.5% on a daily basis, with XAU/USD sitting above $2,630 in the European morning on Friday. EUR/USD struggles to gain traction and retreats toward 1.0400 after closing marginally higher on Thursday. The Bank of Japan is responsible for setting monetary policy in Japan and aims to ensure price stability with an inflation target of around 2%.
Since 2013, the Bank of Japan has implemented an ultra-loose monetary policy to stimulate the economy and fuel inflation, based on Quantitative and Qualitative Easing (QQE) strategies. In 2016, the bank introduced negative interest rates and controlled the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, moving away from the ultra-loose policy stance. The Bank’s stimulus led to a depreciation of the Yen against other currencies, exacerbating in 2022 and 2023 due to policy divergence with other central banks.
The weakening Yen and spike in global energy prices contributed to increased Japanese inflation, surpassing the BoJ’s 2% target. The prospect of rising salaries in Japan also fueled inflation. The trend of the Yen’s depreciation reversed in 2024 when the Bank of Japan abandoned its ultra-loose policy. Overall, the Bank of Japan plays a crucial role in shaping Japan’s monetary policy to ensure economic stability and achieve inflation targets in the country.
