In terms of currencies that have defied expectations so far this year, the yen is probably second to the Australian dollar. The start of the year was characterised by expectations of further yen weakness to come on the back of the stimulus measures, both monetary and fiscal, being enacted by the authorities to get the economy back on its feet and more importantly for the currency, to nudge inflation to the 2% goal on a sustained basis.
There were no signs from the BoJ after their latest meeting overnight that they were itching to enact further easing measures. The yen was initially weaker on the post-meeting announcement, but has since drifted within the 102.80 to 103.00 range. Recall that the much talked about consumption tax increase takes place this month, which is seen dampening growth with consumption having been front-loaded ahead of the event. For now, it is likely to be the dollar that determines the extent to which USDJPY can recover from current levels back to the 105.00.
The main takeout from yesterday was the resilience of the single currency. The impression given by ECB officials was that the ECB is not in a hurry to enact QE, even though it may have been undertaking technical considerations. This allowed EURUSD to recover some lost ground back to the 1.3750 area. Elsewhere the Aussie is worth keeping a close eye on as it finds some buyers at the start of the European session and pushes to levels last seen late November on AUDUSD.
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