News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View more
Real Time News
  • So much for that Evergrande recovery. Shares of the troubled Chinese property developer are down approximately -12% today following yesterday's impressive rally (biggest in a year)
  • Retail trading platform Robinhood announces hire of new Chief Compliance Officer amid regulatory scrutiny
  • There is a ridiculous number of scheduled Fed speeches on the docket next week. Powell specifically will be speaking multiple times including at an ECB hosted forum on central banking (which also has a panel with Fed, ECB, BOE and BOJ heads)
  • USD Ascending Triangle, Bullish for Q4 - #DXY chart on @TradingView
  • Credit rating agency Standard & Poor's is due to give its sovereign credit rating update on Germany today ahead of weekend national elections
  • RT @BIS_org: Since the early 1990s, changes in the #MonetaryPolicy stance have affected a rather narrow set of prices – mostly in the servi…
  • Huawei's CFO Meng Wanzhou reached deal with the US Dept of Justice to return her to China - Dow Jones
  • Cleveland Fed President Loretta Mester says: - sees US GDP in 2022 between 3.75 and 4% - Supports tapering in November and concluding over the first half of 2022 - After liftoff, accommodative policy needed for some time
  • Fed Chairman Jerome Powell doesn't comment on the growth forecast or monetary policy in his introductory remarks
  • Kansas City Fed President Esther George says: - The labor market friction is fading barring a resurgence of virus - A 'normal' economy is likely to remain elusive for some time - Asset buying effects complicate the judging rate change plan
USDOLLAR Losing Traction as JPY Rallies on Stimulus Letdown

USDOLLAR Losing Traction as JPY Rallies on Stimulus Letdown

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- USDOLLAR Index pressing post-Q2'16 GDP report lows near 11930.

- Fed's preferred measure of inflation due out at 12:30 GMT today.

- See the DailyFX Economic Calendar for today’s US data.

In short, the dual monetary and fiscal stimulus plans out of Japan over the past few days have chalked up to a disappointment. The fault lies with fiscal policymakers, not with the BOJ, though. Whatever the BOJ did/does will have little impact unless the measures are amplified by a concurrent fiscal policy response; we now know the hefty fiscal policy response isn't coming. Logically then, knowing that the fiscal policy response is absent, the BOJ likely withheld its 'big bazooka' for a more appropriate time (I can't say with complete certainty, but I'm very inclined to think that Abe and Kuroda were aware of one another's plans).

As we said last week in our report, "USD/JPY, GBP/JPY Reversals Gather Pace as Scope for Japanese Stimulus Fades" (July 26), this story sounds familiar, no? The Federal Reserve faces the same issue: years of fiscal policy stagnation means any new easing the Fed does will have little impact in the areas of the economy that have thus yet to recover from the GFC. Think of it this way, as if the economy were a car: fiscal policy is the engine; monetary policy is the oil that slicks the gears. If the engine is turned off, or isn't set up to run properly, then it doesn't matter how much lubricant you apply - the car won't run.

The other side to all of this is the way the fiscal policy response was set up (qualitatively as opposed to quantitatively). Much of the fiscal outlays will be in the form of lending rather than direct spending, and the relatively small size of the extra budget offers little confidence for a break from current norms. We know from previous episodes that a small bump in short-term government spending/lending rarely translates into long-term economic growth. In fact, in each year since 1993, the Japanese government has announced an extra budget - yet here we ware, after a quarter of a decade of stagnant growth.

Markets don't have much faith that this set of measures will turn around the Japanese economy, because truthfully, Japan faces a serious structural issue: an aging population plagued by declining birth rates. The Japanese Yen is all of the sudden well-positioned for another rally. Admittedly, whiffs of a VaR shock a la 2003 come to mind, as we warned in December 2015: 2Y JGB yields are up +18-bps since the BOJ decision on Friday; and 10Y JGB yields are up +21-bps. Keep an eye on this if you're trading the Yen.: 2Y JGB yields are up +18-bps since the BOJ decision on Friday; and 10Y JGB yields are up +21-bps. Keep an eye on this if you're trading the Yen.

Read more: US Dollar Hits Reset on Fed Rate Expectations Post-GDP

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.