The action began early in Asia with the New Zealand unemployment rate coming in higher than anticipated at 6.5% as opposed to 6.4%. NZD/USD took a spill from 0.7270 to 0.7220 on the data, but the hit kept coming for the kiwi. Two hours later, Reserve bank of New Zealand Governor Bollard began a speech, and as the comments hits the wire, the Kiwi dollar headed lower. Bollard stated that while Australian economic strength was a benefit for his country, both counties should not be treated equally as there are considerable differences and the comparisons are not appreciated. NZD/USD dropped further to eventual 0.7175 lows while the AUD/NZD shot higher by a full big figure to 1.2625.
Later in the day as markets prepared for the BoE and ECB rate decisions traders dumped out of their riskier positions and pushed the yen and the dollar higher. EUR/USD continued to slide from NY highs of 1.4910 as traders looked to lock in profits ahead of the impending data. The EUR/USD high of 1.4883 disintegrated to 1.4825 by mid day, but gained back about 30 pips as London trading got underway. GBP/USD fell from 1.6550 to just under 1.6500 for the session.
The buying of Yen was also influenced by softer equities and a story that claimed that Australia would add a 16% duty to Chinese aluminum extrusions, thus chilling the already cool temperament between the two trade partners. The crosses were all aggressively sold, with GBP/JPY leading the way with a 145 pip drop to 149.00 lows. EUR/JPY plunged 125 pips from 135.15 to 133.90, and NZD/JPY and AUD/JPY skid 115 and 100 pips respectively. USD/JPY cruised lower from 90.85 to 90.35 over the course of the session.
Not to state the obvious, but all traders will be focused on the pending Bank of England and European Central Bank rate decisions due out at 12:00GMT and 12:45GMT respectively. While the call rates will remain unchanged barring a miracle, the key component is to what degree the BoE will boost its quantitative easing program. With numbers in the range of 25 to 75 billion pounds sterling being thrown around, regardless of what is announced it should prove volatile for the markets.
