Key Forex Afternoon Notes:
- Bank of Japan leaves monetary policy unchanged
- BoE meeting minutes show unanimous support to keeping monetary policy intact
- UK unemployment rate improves to 5.8%; claimant count change -29.7k vs. -25k
- UK average weekly earnings excl. bonuses 1.8% vs. 1.9%
- US Housing starts 1089k vs. 1040k; housing starts m/m 4.4%
- US building permits m/m -1.9%
- Canada wholesale trade m/m -0.3%
Later:
- BoC Monetary policy
- BoC press conference
- Australia PMI business
Asian markets were relatively quiet as the Bank of Japan left interest rates and QQE unchanged, while lowering its inflation expectations for the short term, but committed to the 2% inflation target, which BoJ Governor Kuroda expects to be reached either later this year or early 2016.
Trading was fairly stable but the Aussie and Kiwi dollars took on a weaker note against a stronger Yen, in what seems to be a return to a “risk off” mode in the markets ahead of tomorrow’s ECB monetary policy.
The European session had a few releases from the UK. On the employment front, the UK’s unemployment rate improved to 5.8%, after being stuck near 6% since October last year. The weekly average earnings, although fell short of expectations showed a marginal improvement from the previous month showing a modest yet stable recovery in average wage earnings.
The upbeat data was however overshadowed by the Bank of England’s meeting minutes, where all the MPC members were unanimous in their decision to keep the monetary policy as is. With the two hawks, Ian Mccafferty, and Martin Weale now voting for 0.5% interest rate, the BoE could well see the current status quo maintained for most of this year.
While the British Pound saw a modest selloff, the currency managed to stabilize. GBPUSD briefly dipped lower to 1.507 before managing to shrug off the temporary reaction to settle back above 1.51. The Pound was also considerably stronger against the Euro.
With not much of economic events from Eurozone, the markets head into crunch time as the European Central Bank meets to conduct its monthly monetary policy review tomorrow. Expectations are riding high that the ECB Chief, Mario Draghi will most likely announce QE plans. The markets expect nothing less than €500 billion which could involve both sovereign, as well as corporate bond purchases spread across a period of 12 months. However, a lot is left to be seen as the markets continue to turn increasingly bearish on the Euro. Any hints of doubt or disappointment could see the Euro strike back harshly. Also into the equation will be the Swiss National Bank, who as per the press conference last week announcing the shocker are also likely to intervene in the markets tomorrow depending on the outcome of the ECB’s decision. The EURUSD was trading at 1.15 region and fairly subdued ahead of the US trading session.
Housing data was on the tap during the US session which was mixed. While housing starts grew 4.4% over the month, building permits declined -1.9% with last month’s data revised upwards from -5.2% to -3.7%. The markets largely maintained the trend of the day with the Yen solidifying its position as a safe haven bet ahead of tomorrow’s high-risk event.
