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Market Review - 07/08/2013 22:20GMT
The Japanese yen rallies broadly ahead of Thursday's BOJ rate decision
The Japanese yen strengthened broadly on Wednesday and touched to 7-week low of 96.32 on increasing concerns that the Bank of Japan will refrain from adding to its monetary stimulus at the end of its 2-day policy meeting tomorrow.
Although the greenback remained under pressure and dropped to 97.09 in Asian morning due to the selloff in Japanese equities together with concerns that Bank of Japan will refrain from adding to its monetary stimulus after its policy meeting which will end on Thursday, price briefly rebounded to 97.47 before falling again. Price continued its recent descent and fell to 96.99 in European morning, however, dollar recovered to 97.34 ahead of New York open. Renewed selling interest capped rebound and sent the pair to a 7-week low at 96.32 in New York afternoon.
Although the single currency rose briefly to 1.3312 at European open, price dropped to session low at 1.3266 in European morning, due partly to cross-selling of euro versus sterling. However, price pared intra-day gains and briefly climbed to 1.3325 after the release of much better-than-expected German industrial production. Euro continued to trade with a firm undertone and ratcheted higher to an intra-day high at 1.3347 in New York afternoon after Fitch affirmed Germany's credit rating at AAA.
German industrial production in Jun came in at 2.4% m/m n 2.0% y/y, much stronger than the forecast of 2.4% n 2.0%, previous reading is revised to -0.8% n -1.2% respectively.
The British pound traded sideways in Asia and tumbled briefly but sharply to session low at 1.5205 immdiately after the release of the quaterly Bank of England inflation report when Mark Carney said the UK economy recovery wasn't at escape velocity, however, cable immediately pared intra-day losses and soared to 1.5493 as investors interpreted Bank of England's forward guidance not as dovish as initially expected. Price continued to ratchet higher and hit a fresh 1-1/2 month high at 1.5534 in New York morning before stabilising.
BOE's Carney said 'if individual MPC members expect inflation above knock out level then they can judge guidance no longer applies; U.K. economy is not at escape velocity; we do not expect a material increase in borrowing as U.K. economy recovers; FPC should use other lines of defence to tackle problems fm low rates before very blunt tool of MPC to raise bank rate; does not accept that BOE has effectively raised inflation target to 2.5%.'
In other news, Bank of England MPC said 'adopts forward guidance, will not raise interest rates until unemployment fall to 7%.' BOE inflation report forecasts U.K. unemployment rate to stay above 7% until at least Q3 2016; short term market interest rates imply faster withdrawal of stimulus than appear likely; BOE guidance subject to financial stability, medium-term inflation expectations, and BOE forecast that CPI will be below inflation expectations.'
On the data front, Canada Ivey PMI in Jul came in at 48.4, weaker than the expectation of 57.0.
Data to be released on Thursday:
Australia employment change, unemployment rate, Japan rate decision, current account, economic watch DI, China trade balance, import, export, Germany trade balance, import, export, current account, Canada new housing price index, U.S. jobless claims.
The Japanese yen rallies broadly ahead of Thursday's BOJ rate decision
The Japanese yen strengthened broadly on Wednesday and touched to 7-week low of 96.32 on increasing concerns that the Bank of Japan will refrain from adding to its monetary stimulus at the end of its 2-day policy meeting tomorrow.
Although the greenback remained under pressure and dropped to 97.09 in Asian morning due to the selloff in Japanese equities together with concerns that Bank of Japan will refrain from adding to its monetary stimulus after its policy meeting which will end on Thursday, price briefly rebounded to 97.47 before falling again. Price continued its recent descent and fell to 96.99 in European morning, however, dollar recovered to 97.34 ahead of New York open. Renewed selling interest capped rebound and sent the pair to a 7-week low at 96.32 in New York afternoon.
Although the single currency rose briefly to 1.3312 at European open, price dropped to session low at 1.3266 in European morning, due partly to cross-selling of euro versus sterling. However, price pared intra-day gains and briefly climbed to 1.3325 after the release of much better-than-expected German industrial production. Euro continued to trade with a firm undertone and ratcheted higher to an intra-day high at 1.3347 in New York afternoon after Fitch affirmed Germany's credit rating at AAA.
German industrial production in Jun came in at 2.4% m/m n 2.0% y/y, much stronger than the forecast of 2.4% n 2.0%, previous reading is revised to -0.8% n -1.2% respectively.
The British pound traded sideways in Asia and tumbled briefly but sharply to session low at 1.5205 immdiately after the release of the quaterly Bank of England inflation report when Mark Carney said the UK economy recovery wasn't at escape velocity, however, cable immediately pared intra-day losses and soared to 1.5493 as investors interpreted Bank of England's forward guidance not as dovish as initially expected. Price continued to ratchet higher and hit a fresh 1-1/2 month high at 1.5534 in New York morning before stabilising.
BOE's Carney said 'if individual MPC members expect inflation above knock out level then they can judge guidance no longer applies; U.K. economy is not at escape velocity; we do not expect a material increase in borrowing as U.K. economy recovers; FPC should use other lines of defence to tackle problems fm low rates before very blunt tool of MPC to raise bank rate; does not accept that BOE has effectively raised inflation target to 2.5%.'
In other news, Bank of England MPC said 'adopts forward guidance, will not raise interest rates until unemployment fall to 7%.' BOE inflation report forecasts U.K. unemployment rate to stay above 7% until at least Q3 2016; short term market interest rates imply faster withdrawal of stimulus than appear likely; BOE guidance subject to financial stability, medium-term inflation expectations, and BOE forecast that CPI will be below inflation expectations.'
On the data front, Canada Ivey PMI in Jul came in at 48.4, weaker than the expectation of 57.0.
Data to be released on Thursday:
Australia employment change, unemployment rate, Japan rate decision, current account, economic watch DI, China trade balance, import, export, Germany trade balance, import, export, current account, Canada new housing price index, U.S. jobless claims.
