The BOJ presser was held earlier, but that was a dud and so the yen just shrugged it off. And since there wasn’t anything else major on the docket, price action ended up being choppy on most pairs. The Greenback, for intance, steadied after yesterday’s major gains.
Commodities were in retreat, however, and the comdolls (AUD, NZD, CAD) were apparently taking directional cues from that since the comdolls were mostly weaker during the session. Although the Aussie was arguably the only real mover among the three.
- Swiss trade balance: CHF 2.17B vs. CHF 2.41B expected, 3.49B previous
- U.K. public sector net borrowing: £5.1B vs. £7.1B expected, -£1.3B previous
- ECB Overlord Draghi will be speaking later
The BOJ announced earlier during the Asian session that it was maintaining its current monetary policy, which didn’t really surprise anybody. Even the yen didn’t react all that much.
Anyhow, BOJ Shogun Kuroda had a presser just before the morning London session opened.
And, well, Kuroda didn’t really say anything new or surprising since he said that the Japan still has a long way to go to reach the BOJ’s 2% inflation target because of the persistent deflationary mindset in Japan, which results in lower inflation expectations, which then have a dampening effect on actual inflation since Japanese companies are less willing to pay higher wages and are wary of raising prices too much.
But when asked about the possibility of further easing, Kuroda reaffirmed the BOJ’s easing bias but stressed that the current monetary policy is enough when he said the following:
“The BOJ will patiently continue accomodative monetary policy to achieve 2 percent inflation. As we mention in our policy statement, we will also adjust policy as needed looking at economic, price and financial developments. As such, we will take further monetary easing steps if necessary.”
And when Kuroda was asked about a plan to exit its QE program in the future, given the tightening bias from the Fed, ECB, BOE, and others, Kuroda just said the following:
“[I]t is hard to show a specific (exit strategy) now.”
“Japan’s economy is recovering, as is the case of Europe and the United States. But in Japan, inflation expectations aren’t anchored around the BOJ’s price target … U.S. and European inflation expectations are anchored around their central banks’ price targets. That’s especially true in the United States, which is why the Fed is normalising policy.”
“As for Japan, inflation is still distant from the BOJ’s target. It’s natural for monetary policy to differ country by country. There’s nothing wrong with it.”
By the way, Forex Gump has a write-up on the most recent BOJ and FOMC statements, if you want more of the details. You can read it here, if you’re interested.
New Zealand election update
According to the final poll from Newshub ahead of this Saturday’s New Zealand general elections, voting intentions for the National Party fell by 1.5% to 45.8% while voting intentions for Labour, National’s main rival, edged 0.5% lower to 37.3%.
National is still in the lead, but according to Newshub, it is “is teetering in the danger zone” because under New Zealand’s Mixed Member Proportional (MMP) voting, the current voting intentions in favor of National means that National will only be able to secure 56 seats. And it needs to capture at least 62 to form a majority government.
In fact, the 7.1% voting intentions for the Green party is a very big risk for National since voting intentions for Labour and the Greens combined translate to roughly 54 seats.
In other words, the upcoming New Zealand election is a coin toss, which makes it kinda exciting in a way since National had a substantial lead in the previous elections, which made them non-events.
After rallying for the past couple of days, commodities got stomped hard during the earlier Asian session and they only continued to bleed out during today’s morning London session.After rallying for the past couple of days, commodities got stomped hard during the earlier Asian session and they only continued to bleed out during today’s morning London session.
Precious metals were down hard.
- Gold was down by 1.54% to $1,296.08 per troy ounce
- Silver was down by 1.96% to $16.994 per troy ounce
Base metals got a good beating.
- Copper was down by 1.18% to $2.934 per pound
- Nickel was down by 3.89% to $10,922.50 per dry metric ton
Oil benchmarks took hits.
- U.S. WTI crude oil was down by 1.05% to $50.16 per barrel
- Brent crude oil was down by 0.75% to $55.87 per barrel
The Greenback surged in the wake of yesterday’s FOMC statement and market analysts were quite naturally blaming the broad-based commodities rout on that. After all, a stronger dollar means commodities become relatively more expensive to buy, especially if the buyer is holding another currency.
The Greenback was actually mixed for the session, but it did extend its gains a bit since yesterday’s FOMC statement. And just for reference, the U.S. dollar index was up by 0.12% to 92.33 for the day when the morning London session ended.
Risk appetite returns in Europe
The major European equity indices were glowing gamma green during today’s morning London session, which means that risk-taking was the name of the game.
And according to market analysts, the risk-on vibes during the session stemmed largely from higher demand for banking shares after yesterday’s FOMC statement caused rate hike expectations to climb.
After all, banks tend to profit more from a higher interest rate environment.
- The pan-European FTSEurofirst 300 was up by 0.28% to 1,503.97
- Germany’s DAX was up by 0.33% to 12,610.50
- The blue-chip Euro Stoxx 50 was up by 0.55% to 3,544.00
Major Market Mover(s):
Price action was kinda choppy, but the comdolls (AUD, NZD, CAD) were broadly weaker during today’s morning London session. The Aussie was especially weak, though.
In fact, the Aussie was the only one that showed clear directional movement. Also, the Aussie has been broadly weaker since the Asian session, likely because the Aussie has been getting extra selling pressure when RBA Boss Lowe said earlier that “More likely it [RBA’s cash rate] will go up but it’s not for some time,” which is a subtle way of saying that “I ain’t joining the rate hike camp yet.”
AUD/USD was down by 25 pips (-0.33%) to 0.7932, AUD/CHF was down by 20 pips (-0.26%) to 0.7725, AUD/JPY was down by 42 pips (-0.47%) to 89.23
Watch Out For:
- 12:30 pm GMT: Canadian wholesale sales (-0.7% expected, -0.5% previous)
- 12:30 pm GMT: U.S. initial jobless claims (300K expected, 284K previous) and Philadelphia Fed manufacturing index (17.2 expected, 18.9 previous)
- 1:00 pm GMT: U.S. JPI (0.4% expected, 0.1% previous)
- 1:30 pm GMT: ECB Overlord Draghi is scheduled to speak later
- 2:00 pm GMT: Euro Zone consumer confidence (steady at -1.5 expected)
- 2:00 pm GMT: CB’s U.S. leading index (0.3% expected, same as previous)