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The USD/JPY pair is currently trading around the 5-day MA of 109.58, having hit a high of 110.00. The Bank of Japan (BOJ) kept key policy tools unchanged yesterday and revised lower its inflation and growth forecast.

·       EURO UNDER DOWNWARD PRESSURE

Against the background of economic weakness in the Eurozone, speculation is growing that the ECB could wait until the fourth quarter of this year or even until 2020 before increasing its benchmark interest rates. The central bank’s current guidance is that rates will be on hold “through the summer” of this year but the weakness of the Eurozone economy suggests that a rise in the third quarter of 2019 is becoming increasingly unlikely.

·       The meeting Thursday of the ECB’s rate-setting Governing Council will end with it leaving all its monetary-policy settings unchanged but any acknowledgment that downside risks to the Eurozone economy have increased will likely hit the Euro, which has been weakening since hitting a high of 1.1570 on January 10.

The European Central Bank holds its first meeting of the year on Thursday as concern grows about weak economic growth at home and risks abroad from global trade tensions and Brexit.

Here are some of the key questions on the radar for markets.

1. Will the ECB change its assessment of the risks facing the economy?

2. What about the guidance that rates will stay on hold through the summer. Could that change?

3. When does the ECB expect inflation to move higher?

4. Has the weak data encouraged the ECB to start discussing new multi-year loans to banks?

5. Is the ECB prepared for a no-deal Brexit?

·       The European Central Bank is all but certain to keep policy unchanged on Thursday but may acknowledge a sharp slowdown in growth, raising the prospect that any further policy normalization could be delayed.

The ECB last month ended a landmark 2.6 trillion euro ($2.96 trillion) bond purchase scheme and maintained its guidance that an interest rate hike is likely late this year.

But growth appears weaker than thought just a few weeks ago, suggesting that its next move could even be an easing of policy rather than a tightening.

Germany, France and Italy, the euro zone’s biggest economies, barely grew in the fourth quarter and ECB President Mario Draghi has already acknowledged that the slowdown could be longer than expected, setting up the ECB for a dovish meeting.

At most, Draghi could downgrade the bank’s economic assessment, arguing that growth risks are now tilted to the downside. He could also provide clues about new loans to banks, called Long-Term Refinancing Operations or LTROs, likely to come in the spring.

·       Amid an ongoing trade war between the world's two largest economies, reports emerged that China has offered to buy more U.S. products in the coming years to reduce the two countries' bilateral goods trade imbalance.

Such a gesture may address one of President Donald Trump's stated goals for U.S.-China trade negotiations, but experts say it's addressing a metric that doesn't matter very much.

That is, a bilateral trade balance — which measures the transactions between two countries — is an indicator that doesn't adequately reveal who's gaining or losing in a relationship, economists and trade experts said.

The arguments for and against relying on such metrics touch on multiple factors, but a frequently repeated view is that paying for goods does not automatically make the buyer a loser.

Many economic experts disagree with Donald Trump's focus on the trade deficit but still support the president's push to change how China treats international companies.

·       China and the United States will have in-depth discussions on various economic and trade issues during Chinese Vice Premier Liu He’s U.S. visit next week, the Chinese commerce ministry said on Thursday.

Both sides are currently in touch on the detailed arrangements surrounding his visit on Jan. 30-31, Gao Feng, spokesman at the commerce ministry, told reporters.

U.S. President Donald Trump has vowed to increase tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports on March 2 unless China takes steps to protect U.S. intellectual property, end policies that force American companies to turn over technology to a Chinese partner, allow more market access for U.S. businesses and reduce other non-tariff barriers to American products.

China has repeatedly played down complaints about intellectual property abuses, and has rejected accusations that foreign companies face forced technology transfers.

On Wednesday, White House economic adviser Kevin Hassett said he believed the United States and China could reach a trade deal by March 1.

·       Oil prices declined on Thursday on lingering concerns that slowing global economic growth may limit fuel demand and after a surprise build in U.S. crude inventories.

International Brent crude oil futures LCOc1 were at $60.90 a barrel at 0745 GMT, down 24 cents, or 0.4 percent, from their last settlement.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $52.44 per barrel, 18 cents lower from their last close.

Oil market sentiment was also weakened by a surprise increase in U.S. crude inventories after refineries cut output, data from industry group the American Petroleum Institute showed on Wednesday.

Crude inventories rose by 6.6 million barrels in the week ended on Jan. 18 to 443.6 million barrels, compared with analyst expectations for a decrease of42,000 barrels, the API said. Refinery runs fell by 152,000 barrels per day.

Reference: Reuters, CNBC, FX Street, Daily FX