USD/JPY Flat As BOJ Minutes Point to Dissent

 | May 26, 2014 09:56AM ET

The Japanese yen is flat on Monday, as USD/JPY trades in the high-101 range late in the European session. Trade is expected to be thin, as US markets are closed for the Memorial Day holiday. In Japan, the BOJ minutes were released, and there was dissension among policymakers over growth and inflation projections. Monday's sole release is Japanese Corporate Services Price Index, with the markets expecting a strong surge in the April reading.

The BOJ minutes pointed to some dissension, as policymakers were not in agreement as to growth and inflation forecasts. There was also a suggestion set a timeframe for monetary easing, but this was rejected by the majority. The BOJ has been purchasing 60-70 trillion yen/year in asset purchases, and this aggressive monetary stance has raised inflation and growth levels, but has severely hurt the yen, which continues to trade above the 100 level.

US employment releases disappointed on Thursday. Unemployment Claims has looked sharp over the past two releases, but the short streak came to an end, as the key employment indicator climbed to 326 thousand, up from 297 thousand a week earlier. This missed the estimate of 312 thousand. With future QE tapers by the Federal Reserve contingent on solid economic data, key employment releases such as Unemployment Claims will continue to be closely scrutinized by the markets. Elsewhere, key housing data was a mix, as Existing Home Sales fell short of expectations, while New Home Sales improved sharply in April and easily beat the estimate.

The Federal Reserve minutes were released last week, and there was no dramatic response from the markets. In the minutes, policymakers discussed an exit strategy from its QE stimulus program, which is set to terminate at the end of 2014. This will likely mean an increase in interest rates, but the minutes didn't provide a timetable as to when rates might go up, and by how much. Low inflation levels means there is less pressure on the Fed to raise rates next year, but the economic conditions could change in the meantime. The Federal Reserve remains comfortable with its accommodative stance, and will want to see stronger growth and employment numbers before making changes to monetary policy, such as raising rates.

USD/JPY for Monday, May 26, 2014