Morning Bid: BOJ’s hawkish hold

A look at the day ahead in European and global markets from Ankur Banerjee

In a week packed with central bank meetings, the Bank of Japan’s hawkish hold ​has set the stage for the Fed, the Bank of England and the ECB ‌to confront inflationary pressure as the war in the Middle East keeps oil prices well above $100 a barrel.

As widely expected, the BOJ left unchanged its short-term policy rate at ​0.75% but three of the nine-member board proposed hiking borrowing costs, ​signalling policymakers’ concerns over escalating price pressures from the Iran war.

That ⁠helped lift the yen just a bit to 159.02 per U.S. dollar ​but the frail currency remains perilously close to 160, a level that has ​previously led Tokyo to intervene in the currency market. The yen has been rooted around 159 since mid-March.

The move from the BOJ may give some near-term support but ultimately the ​yen is unlikely to firm too much, analysts say. In short, markets can ​expect a continuation of the “carry trade”, using the yen as a cheap funding currency.

In geopolitics, ‌the ⁠U.S. was reviewing Tehran’s latest proposal to resolve the war in the Middle East but a U.S. official said President Donald Trump was unhappy with the proposal because it did not address Iran’s nuclear programme.

The uncertainty around the two-month-long conflict ​will surely keep ​oil prices supported, ⁠with Brent crude futures at $109 per barrel, well above the pre-war levels.

Investors’ attention this week is on earnings from tech ​giants and central bank meetings this week.

The Federal Reserve, ​Bank of ⁠England and the European Central Bank are all due to announce policy decisions this week. All three are expected to hold rates unchanged but attention will be ⁠on ​what policymakers say about inflation and growth.

Key developments ​that could influence markets on Tuesday:

French unemployment data for March

Earnings: Novartis, Barclays, BP and Airbus.