Financial markets reacted to BoJ’s decision, reviving a risk-on sentiment, driving equity and commodity prices. Japan dominated headlines on Friday as the BoJ continued its pursuit of inflation targets. A tight 5-4 vote by the BoJ board saw the implementation of a negative interest rate of 0.1% on certain excess holdings of cash. The rate change aims at incentivizing banks to lend and companies to spend. The BoJ highlighted the increasing downside risks to growth and inflation as key drivers to the rate decision. Recent financial market turmoil, sharp oil price declines, and growth concerns in emerging markets, in particular China, continue to weigh heavily on policy decisions. Kuroda has indicated that further action may be required if wage growth fails to strengthen enough to generate 2% inflation. The USD/JPY pair is currently trading around the 121.25 level at time of writing, after markets reacted bullish to the BoJ rate decision.
Indices were on the rise as the risk-on sentiment took hold. The European session boasted gains of 2.56% for the FTSE 100, with the DAX and IBEX closing up 1.6% and 2.65% respectively. Positive sentiment appeared to spill over into the US session with the DJIA up 2.47% and the S&P500 gaining 2.48%.
Oil prices continue to hover around the $33.56/bbl mark having rebounded from record lows. Recent price movements are in-part a market reaction to potential production negotiations between Russia and Saudi Arabia. Although markets reacted positively to the news, historically, co-ordination between both countries has proven difficult, with future negotiations expected to be no different.
Trading quote of the day: Novice Traders trade 5 to 10 times too big. They are taking 5 to 10% risks on a trade they should be taking 1 to 2 percent risks. Bruce Kovner
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