Today’s Comment
The job report published on Friday offered a positive surprise (employment fell by 54,000 as compared to the expected level of 105,000). Also, the recent two months’ figures were revised up by totally 123,000, which resulted in optimism in the financial markets. However, in the FX markets this led to weakening of the Swiss franc, the Japanese yen and the US dollar, and EUR/USD is nearing a test of important levels at about 129.30. A breach may cause further weakening of the dollar up towards 130.30 and then 131.10 against the euro.
We are in for a quiet start to the week as there are hardly any economic indicators on the agenda.
Moreover, the Americans are having the day off in celebration of Labour Day, so investors will presumably be hesitant today. However, tomorrow Bank of Japan (BoJ) will make its interest-rate announcement; the bank began its September monetary-policy meeting today. The pressure on BoJ has increased in recent weeks as the yen increased, and Japanese politicians have intensified the rhetoric about the damaging effects of the appreciation on the fragile Japanese economy. Speculations about the possibility of an upcoming intervention in the FX markets have increased lately, and the market players have been looking out for indications of any imminent intervention against the skyrocketing of the yen. For a short while the news of the extraordinary meeting of BoJ gave rise to hopes that an intervention was about to take place. BoJ merely expanded the existing liquidity programme and did not make any comments relating to the yen. Evidently this disappointed the markets, and the upwards pressure on the yen is still intact. Therefore the markets are awaiting tomorrow’s announcements from BoJ.
Thursday will see the interest-rate meeting of Bank of England. We do not expect any changes in the interest rate, but after a period with disappointing economic indicators, the markets will undoubtedly watch out for any signals about further easing of the monetary policy.
Today’s Key Events
- 11:00:00 Speech by Mr Stark of the ECB (EUR)
Tuesday morning
- N/A BoJ’s interest-rate announcement (JPY)
Today’s Chart – USD/JPY
