China’s weak trade balance numbers saw the markets take a breather as the commodity risk currencies eased back from their strong rallies. In early Asian trading the AUD, NZD and the CAD were seen trending lower while the Japanese Yen surged with gains, currently up 0.16% at the time of writing. The Asian equity markets were seen to be trending weaker across the board and the European markets are expected to follow suit.
The US Dollar was trading at 119.836Yen as the currency failed to capitalize on the gains made last week near the highs of 120.275. The fallout from this level has seen the USDJPY trading back close to 119.775 support followed by the major support zone between 119.52 through 119.4. USDJPY remained range bound into the 8th consecutive week with no direction in sight.
BoJ Governor Kuroda downplays QQE expansion
On the sidelines of the IMF meeting over the weekend, Bank of Japan Governor, Haruhiko Kuroda was quoted by the wires that the Japanese Central Bank would be unlikely to expand its stimulus program when it meets on October 30th. The comments come in stark contrast to many economists polled who expect to see the BoJ being compelled to expand its monetary stimulus program, while on the other hand, Kuroda continues to maintain an optimistic view that Japan’s inflation would hit the Central Bank’s 2.0% target inflation rate. The markets at large have been optimistic that the BoJ would expand its stimulus program as the USDJPY remains range bound, now close to 31 days, trading within the highs and lows of 121.68 and 118.38, making it evident that a break out is inevitable.
At its previous monetary policy meeting, the Bank of Japan left its monetary policy unchanged surprising some economists. The BoJ kept up with its optimistic view on inflation which saw a subdued reaction from the USDJPY and the JPY crosses in general. Bloomberg’s BoJ poll estimated that 5.6% of members expected the BoJ to ease at its last meeting, while some institutional participants stuck to their ground that the BoJ will expand its monetary policy stimulus before the end of 2015.
Economic data from Japan later in the week will see the August numbers of the Tertiary industry activity alongside September corporate goods price index both of which could weigh in on the BoJ’s decision when it meets on October 30th.
With the exception of USDJPY which has been range bound, most of the other crosses have been trending lower. AUDJPY which saw an impressive 12 day rally was seen easing back off the highs of 88.09, currently down -0.77%. EURJPY was clearly rejected above 136.51 and looks poised for a short term decline towards 135.5. The GBPJPY is one of the Yen crosses which remain inconclusive at this point ahead of the UK CPI data due for release later today. Prices failed at the highs of 183.98. UK CPI numbers are due for release at 0930 hours UK time.
