Should We Expect Helicopter Money This Year?
The Post-Brexit UK PMIs continue to impact GBP, with the currency seeing an extension of the downside against both EUR and USD, falling to 1.3150 against the latter, lower by around 140 pips from its high earlier in the session. Support has been found at this level, with stops touted below this.
JPY and Japanese Fiscal Stimulus
Bank of America – ML assumes that the Bank of Japan will want to take part in the stimulus for Japanese economy. While the markets are guessing the size of the fiscal push the global sentiment equally likely depends on what the Bank of Japan delivers next week. (Bank of America Merrill Lynch) Signals that a big fiscal package may have little impact in the short term which would require some cooperation from Bank of Japan.
The thought is that the markets have priced in probably more than will be delivered by the government so the announcement may see USD/JPY fall to 105. They do not expect helicopter money any time this year, while it is still possible in 2017 as the possibilities of buying JGBs run thinner – secondary market will be drained by that time so the Bank of Japan may need to buy directly from the ministry of finance and this will be an equivalent of helicopter money.
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