The Yen was little changed near an all-time low against the Euro and Dollar early this morning, as investors showed muted reaction after the Bank of Japan held interest rates unchanged at 0.5% as expected but did so on a split vote. At the BoJ policy meeting, only one of the nine boards members voted to lift rates, compared with market expectations that up to three members might vote for a hike.
Moody’s Investors Service cut ratings on $5.2B of bonds backed by US sub-prime mortgages and Standard & Poor’s threatened to do the same, prompting the biggest jump in the GbpUsd in three months. The slowdown in the US housing market is expected to keep the Federal Reserve on hold.
News and Events:
The Yen was little changed near an all-time low against the Euro and Dollar early this morning, as investors showed muted reaction after the Bank of Japan held interest rates unchanged at 0.5% as expected but did so on a split vote. At the BoJ policy meeting, only one of the nine boards members voted to lift rates, compared with market expectations that up to three members might vote for a hike. The Yen initially slipped against the Dollar and the Euro as investors took the vote to suggest that the Central Bank may not be in hurry to raise rates, despite expectations of an increase as early as August. Analysts said �after seeing only one vote for lifting rates this time, the timing for next rate increase may be delayed until September of October�. Traders refrained from selling the Yen further on the grounds that a BoJ rate hike in August was still almost certain and that the voting split did little to alter overall market expectations.
Yesterday, the Sterling rose to the strongest in 26-year against the Dollar on speculation the Bank of England will raise interest rates further this year, while a slowdown in the US housing market keeps the Federal Reserve on hold. Moody’s Investors Service cut ratings of bonds backed by US sub-prime mortgages and Standard & Poor’s threatened to do the same, prompting the biggest jump in the GbpUsd in three months. It rose as high as 2.0363 (the highest since June 1981) before closing 0.23% at 2.0314. The Bank of England lifted its main rate for a fifth time in a year last week to 5.75% to quell inflation that’s stayed above its 2% target for a year. The Yen fell versus the Euro, Dollar and other major currencies as strength in US stocks signaled investors are halting unwinding from riskier assets. The Yen gave up gains posted days before when investors fled risky trades following Moody’s Investor Service’s move to cut ratings on $5.2B of bonds backed by US sub-prime mortgages. EurJpy went up 0.54% to 168.20 after touching 166.51 low. UsdJpy was up 0.52% to 122.35 after touching 121.07 low. The Yen also declined against the Sterling, Australian and New Zealand Dollars.
Today’s Key Issues (time in GMT):
Bank of Japan Rate unchanged 0.5%
09.00 EUR Euro-zone 1Q Gross Domestic Product 0.6% vs 0.9% (QoQ)
09.00 EUR Euro-zone 1Q Gross Domestic Product 3% vs 3.3% (YoY)
09.00 EUR Euro-zone May Industrial Production 1% vs -0.8% (MoM)
09.00 EUR Euro-zone May Industrial Production 2.3% vs 2.8% (YoY)
10.30 US Fed’s Kroszer speaks on Basel II to NY Bankers
12.30 US May Trade Balance $-60.0B vs $-58.5B
12.30 US July 7th, Initial Jobless Claims 315k vs 318k
12.30 CAD May Trade Balance Cad 5.5B vs 5.8B
12.30 CAD May New Housing Price Index 0.6% vs 0.8% (MoM)
12.30 CAD May Merchandise Exports 0.5% vs -0.3%
12.30 CAD May Merchandise Imports 1.0% vs -2.2%
14.30 CAD Bank of Canada releases the Monetary Policy report
18.00 US Monthly Federal Budget June $ 30.00B vs $20.52B
20.40 US Fed’s Yellen speaks at luncheon in Anchorage, Alaska
22.45 NZD May Retail Sales 0.4% vs -1.2% (MoM)
22.45 NZD May Retail Sales ex-auto 0.3% vs -0.9% (MoM)
The Risk Today:
EurUsd remains strong after having broken 1.3750 resistance and hit 1.3784 Tuesday new record high. A return below 1.3659 former resistances will put the actual positive trend on hold. Market is now far away form a possible set back lower than 1.3373 which would open the way toward 1.3277 key support (50% retracement from 1.2872 to 1.3681 advance). Initial minor support holds 1.3750 former trend resistance.
GbpUsd remains strong having hit yesterday 2.0363 high. This marks the actual minor resistance. Market 2.0305 former rend resistance holds initial support. A break there support will open the door back down to 2.0100 strong support.
UsdJpy rebounded on 120.98 -121.07 low range and hit yesterday 122.52 high. Renewed strength will focus on 124.15 late June high. A break toward 124.15 will reopen the way to 125.57 December 2002 high. Initial resistance holds 122.10. Initial support holds 120.98 level. A break down will put 119.55 in sight.
UsdChf failed to consolidate around 1.2200 level. Market went sharply down to 1.1993 low yesterday before closing 1.2057. On the recent downtrend, focus shifted on 1.1996 trend low support. Former support 1.2234 marks the initial resistance.
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland