- U.K. Gfk consumer confidence: up from 2 to 4 vs. 1 expected
- Australia’s quarterly PPI down to 0.3% from 0.9% vs. 0.6% estimated
- Australia’s quarterly PPI (y/y) up to 0.9% from 0.7%
- Australia’s private sector credit up by 0.5% vs. 0.6% expected
- BOJ adopts NEGATIVE interest rates
- PBoC injects 100B yuan via open market operations
Talk about ending the week with a bang! Forex traders were all over the charts after the BOJ printed its decision to adopt NEGATIVE interest rates.
Japan’s data dump – Currency warriors had plenty to digest about the Land of the Rising Sun even before the BOJ’s monetary policy announcement. Market players paid particular attention to household spending (weaker than expected), industrial production (better than expected), and Japan’s inflation numbers (steady to weak). Here’s a list of today’s printed reports:
- Housing starts down by 1.3% vs. 0.5% expected, 1.7% previous
- Household spending (y/y) down by 4.4% vs. 2.3% downtick expected
- Preliminary industrial production down by 1.4% in December vs. 0.3% downtick expected
- Unemployment rate steady at 3.3%
- Core CPI (y/y) steady at 0.1%
- Tokyo core CPI(y/y) down by 0.1% vs. 0.1% increase expected
BOJ adopts negative interest rate – The BOJ ended the trading month with a bang when it announced that it would be adopting a NEGATIVE interest rate. More specifically, it would be adopting a multi-tiered system where the outstanding balance of financial institutions will be divided into three tiers and incur different interest rates.
Existing balances will earn a rate of 0.1%; required reserves will be charged with a 0.0% rate, and the current account – holdings in excess of the previous two tiers – will be charged with a rate of 0.1%. The BOJ stated that it’s willing to further cut its rates (read more expensive for financial institutions) if necessary. Yipes! Last but not the least, the central bank further lowered its inflation forecasts and said that it now expects inflation to reach its 2.00% target by the first half of 2017.
PBoC injects more money…again – For a third day this week the People’s Bank of China (PBoC) injected more liquidity into the markets. This time the central bank used 20 billion yuan worth of 7-day reverse repos and 80 billion yuan worth of 28-day reverse repos. Not exactly surprising ahead of a potential liquidity crunch during China’s Golden Week celebrations.
Major Currency Movers:
JPY – Not surprisingly, the BOJ’s surprise sent forex bulls and bears all over the charts with the yen making significant spikes against its counterparts.
USD/JPY rocketed by a ridiculous 285 pips (+2.40%) before settling at 120.04 while EUR/JPY zoomed from 129.26 to 132.28 before going back to 131.18. Even GBP/JPY shot up from 170.20 to 172.94 before closing at 172.44 while AUD/JPY moved from 84.12 to 86.18 before closing at 85.24.
USD – Thanks to the closely-watched USD/JPY, the dollar also made waves across the board. The low-yielding currency spiked higher against the euro, pound, franc, and Aussie before losing almost all of its gains. A quick look at the charts though, points to the dollar bulls advancing their case in early European trading.
- 2:00 am GMT: German retail sales (expected at 0.3% vs. 0.2% previous)
- 2:45 am GMT: French consumer (expected to rise by 0.6% vs. 1.1% decline last month)
- 3:00 am GMT: Switzerland KOF economic barometer to dip from 96.6 to 95.9?
- 3:00 am GMT: Spanish CPI (y/y) estimated to inch higher from 0.0% to 0.1%
- 3:00 am GMT: Spanish flash quarterly GDP expected to remain at 0.8%
- 5:00 am GMT: Euro Zone CPI flash estimate to rise by 0.4% against last month’s 0.2%?
- 5:00 am GMT: Euro Zone core CPI (y/y) expected to remain at 0.9%
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
Head on to Big Pippin’s Daily Chart Art for some pip-locking technical setups!