The main event today for Asia Pacific trading is the Bank of Japan meeting. JPY has been rallying heading against USD and in the middle of the pack relative to other major currencies heading into the decision. No change is expected to the bank’s QE target but it will be interesting to see if anyone joins the lone dissenter calling for QE purchases to be cut in half. The statement and press conference may also attract attention from people looking for clarification on Governor Kuroda’s Yen-supportive statements from last week which has helped to shore up the currency in recent trading. Because of this, JPY pairs could be active around today’s developments.
Today’s sessions in North America and Europe were dominated by reaction to yesterday’s FOMC meeting and forecasts and speculation on how soon Greece could potentially leave the Eurozone. US stocks rallied and USD dropped continuing their momentum from Wednesday as the street took a cuts to the Fed members’ GDP and fed funds forecasts as relatively dovish, pushing off interest rate liftoff to September and possibly even December. Thursday’s data was also supportive with jobless claims, leading index and Philadelphia Fed all coming in stronger than expected indicating an economy that’s strengthening but not too strong.
News out of Europe was mainly focused on Greece again today. There were lots of rumours and denials but the bottom line at the end of the day was that no progress was made at the Eurogroup meeting, an emergency summit has apparently been scheduled for Monday and there has been lots of speculation that Greece may have to leave the Eurozone soon and that more ECB support may be needed for the Greek banking system. Despite growing risks, the Dax
managed to shrug off early losses and follow the Dow higher on the day.
The combination of a falling USD and growing political and financial risk in the Eurozone ignited a big rally for gold which gained over 2% and drove back up over the $1,200 level. With the potential that the ECB may have to put more money into the economy to avoid contagion, gold may become increasingly active over the next several days.
In currency markets one trend that may be active again today is the spread between AUD and NZD. AUD has been one of the top performing majors over the last 24 hours while NZD has been one of the weakest following yesterday’s weak New Zealand GDP report which fired up speculation that the RBNZ may have to cut interest rates again. Both dollars could be active again relative to each other on today’s New Zealand consumer confidence report. Depending on the news, we could see a reversal if traders decide to take profits ahead of the weekend or a short squeeze rally if momentum is maintained.
With the risks of a Grexit next week increasing, as the weekend approaches we could see another round of traders taking money to the sidelines in case something happens to Greece while markets are closed.
There have been no major announcements following the US market close today.
Significant announcements released overnight include:
Norway interest rate 0.25% cut to 1.00% as expected
Switzerland interest rate (0.75%) no change as expected
US Philadelphia Fed 15.2 vs street 8.0
US consumer prices 0.0% vs street 0.1%
US core CPI 1.7% vs street 1.8%
US jobless claims 267K vs street 277K
US leading index 0.7% vs street 0.4%
US natural gas 89 BCF vs street 93 BCF
UK retail sales 4.6% as expected
UK retail ex auto and fuel 4.4% vs street 4.3%
Upcoming significant announcements include:
11:00 am AEST NZ consumer confidence previous 123.9
4:00 pm AESTish Bank of Japan decision ¥80T/yr target no change expected
8:30 am EDT Canada consumer prices street 0.8%
8:30 am EDT Canada core CPI street 2.1%
8:30 am EDT Canada retail sales street 0.7%
8:30 am EDT Canada retail ex auto street 0.3%
1:00 pm EDT US Baker Hughes drill rig count previous 859
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