Asian Session Recap – March 11, 2014

  • BOJ makes no changes to monetary policy as expected
  • AU business confidence and conditions print below previous readings
  • PBOC plans on full interest rate reform in the next two years
  • NZD supported by stronger rate hike expectations
  • UK inflation report hearings and manufacturing production data due
  • Nikkei closes up by 0.69% at 15,224.11

As expected, the Bank of Japan (BOJ) kept monetary policy unchanged in the meantime. Policymakers did express a bit of concern on the recent slowdown in exports but mentioned that overseas trade is leveling off and that business investment is likely to improve. Yen pairs barely reacted to the release, with EUR/JPY still moving sideways around 143.15 and USD/JPY holding on to the 103.25 area.

Traders also barely reacted to Australia’s reports, which showed that business confidence and outlook have slipped since its readings last month. AUD/USD initially fell by 20 pips at the reports’ release but soon found support at the .9010 area.

It also helped the Aussie that PBOC Governor Zhou Xiaochuan had announced plans of a full interest rate reform in the next two years as part of China’s economic liberalization goals. This basically means that the world’s second largest economy will loosen its grip on lending rates and allow them to be market-driven. Whether this is likely to have a long-term effect on the forex market, particularly for the Australian dollar, remains to be seen but analysts are already buzzing about the possibility of easier credit conditions and stronger business investment in China.

Despite these recent economic updates, most major currencies drifted sideways and waited for bigger catalysts. One of the biggest movers in the past few hours is the New Zealand dollar, which continued to draw support from stronger rate hike expectations in the upcoming RBNZ decision, thanks to remarks from Prime Minister John Key.

Coming up, we have the UK inflation report hearings and manufacturing production data set to rock the London trading session. Bear in mind that the BOE recently suspended an official involved in a rate manipulation scandal and that this issue might come up in today’s BOE hearings. Meanwhile, the manufacturing production report is slated to show another 0.3% increase which might help keep the pound afloat after the bleak BRC retail sales monitor release earlier today.

Also due in the next few hours is the German trade balance, which might show a wider surplus of 19.3 billion EUR compared to the previous 18.5 billion EUR figure. ECOFIN meetings are set to start as well, and any updates might have an impact on euro pairs. Stay on your toes!

See also:

U.S. Session Recap

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