Market Review - 29/01/2016 16:18GMT
Yen tumbles as BoJ announces negative rates
The Japanese yen tumbled across the board on Friday after the Bank of Japan surprised the markets by announcing negative interest rates as a measure to reach its 2% inflation target.
The BOJ said it would apply a negative interest rate of -0.1% on selected current account deposits that financial institutions hold with it, effectively charging banks interest for parking excess deposits at the central bank.
The greenback briefly weakened to 118.52 in Asian morning before surging to as high as 121.42 immediately after Bank of Japan's decision. Although price swiftly retreated back to 119.13, renewed buying there lifted the pair and dollar continued to ratchet higher and eventually hit an intra-day high at 121.68 in New York, helped also by the release of in-line U.S. GDP data.
U.S. GDP annualised came in at 0.7% vs forecast of 0.8%.
Although the single currency briefly spiked down to 1.0884 in Asian morning after BoJ's rate decision, price swiftly recovered to 1.0949. However, renewed selling there pressured the pair lower and euro retreated to 1.0885 in early European morning before tumbling to an intra-day low at 1.0810 in New York on dollar's broad-based strength following release of U.S. GDP data.
The British pound briefly rose from Asian low at 1.4333 to session high at 1.4413 ahead of European open on cross-buying of sterling vs euro, however, renewed selling there pressured the pair lower. Intra-day decline accelerated in New York after U.S. data and cable tumbled to an intra-day low at 1.4162.
On the data front, U.S. University of Michigan consumer confidence came in slightly weaker-than-expected at 92.0 vs forecast of 93.0.
In other news, BoJ Governor Kuroda said 'will lower rates further if needed; expect negative rates to spread through economy, push down yield curve; today's decision will allow easing of policy on 3 dimensions; 3-tiered structure designed to maximise impact of negative rates; will continue qqe with negative rates as long as needed to meet price goal; will examine risks to econ, prices, and will not hesitate to take additional easing steps if needed; Japan's economy has continued to recover moderately; underlying inflation has been improving steadily; expect oil price to make negative contribution to cpi until end of fiscal 2016; global financial markets showing signs of uncertainty; boj decided negative rates to avoid hurting business sentiment; today's decision was in response to risks to japan's economy and prices; negative rate policy doesn't show we've reached jgb buying limit; today's decision does not indicate limit in boj's qqe; negative rates, jgb buying will lower short and long end of yield curve.'
Data to be released:
Australia AGI manufacturing index, TD securities inflation, China manufacturing PMI, non-manufacturing PMI, Japan manufacturing PMI, Swiss manufacturing PMI, France manufacturing PMI, Italy manufacturing PMI, Germany manufacturing PMI, Euro zone manufacturing PMI, U.K. manufacturing PMI, mortgage approval, U.S. personal consumption expenditures, personal spending, personal income, construction spending manufacturing PMI and Canada manufacturing PMI on Monday.
Australia interest rate decision, Swiss retail sales, Germany unemployment rate, unemployment change, Italy unemployment rate, Euro zone unemployment rate, producer price index, U.S. Redbook and ISM New York index on Tuesday.
New Zealand unemployment rate, job growth, Australia AIG service index, building permits, imports, exports, trade balance, China service PMI, Japan consumer confidence index, Italy service PMI, CPI, France service PMI, Germany service PMI, Euro zone service PMI, retail sales, U.S. mortgage applications, ADP employment change, service PMI, non-manufacturing PMI, participation rate and labour cost index on Wednesday.
Australia business confidence, Swiss consumer climate, U.K. Halifax house prices, U.K. Bank of England rate decision, MPC vote, U.S. initial jobless claims, unit labour cost, productivity and factory order on Thursday.
Australia retail sales, Germany factory orders, France imports, exports, trade balance, U.S. unemployment rate, non-farm payroll, average earnings, private payrolls, manufacturing payrolls, participation rate, trade balance, Canada imports, exports, international balance, participation rate, net change in employment and Ivey PMI on Friday.
Yen tumbles as BoJ announces negative rates
The Japanese yen tumbled across the board on Friday after the Bank of Japan surprised the markets by announcing negative interest rates as a measure to reach its 2% inflation target.
The BOJ said it would apply a negative interest rate of -0.1% on selected current account deposits that financial institutions hold with it, effectively charging banks interest for parking excess deposits at the central bank.
The greenback briefly weakened to 118.52 in Asian morning before surging to as high as 121.42 immediately after Bank of Japan's decision. Although price swiftly retreated back to 119.13, renewed buying there lifted the pair and dollar continued to ratchet higher and eventually hit an intra-day high at 121.68 in New York, helped also by the release of in-line U.S. GDP data.
U.S. GDP annualised came in at 0.7% vs forecast of 0.8%.
Although the single currency briefly spiked down to 1.0884 in Asian morning after BoJ's rate decision, price swiftly recovered to 1.0949. However, renewed selling there pressured the pair lower and euro retreated to 1.0885 in early European morning before tumbling to an intra-day low at 1.0810 in New York on dollar's broad-based strength following release of U.S. GDP data.
The British pound briefly rose from Asian low at 1.4333 to session high at 1.4413 ahead of European open on cross-buying of sterling vs euro, however, renewed selling there pressured the pair lower. Intra-day decline accelerated in New York after U.S. data and cable tumbled to an intra-day low at 1.4162.
On the data front, U.S. University of Michigan consumer confidence came in slightly weaker-than-expected at 92.0 vs forecast of 93.0.
In other news, BoJ Governor Kuroda said 'will lower rates further if needed; expect negative rates to spread through economy, push down yield curve; today's decision will allow easing of policy on 3 dimensions; 3-tiered structure designed to maximise impact of negative rates; will continue qqe with negative rates as long as needed to meet price goal; will examine risks to econ, prices, and will not hesitate to take additional easing steps if needed; Japan's economy has continued to recover moderately; underlying inflation has been improving steadily; expect oil price to make negative contribution to cpi until end of fiscal 2016; global financial markets showing signs of uncertainty; boj decided negative rates to avoid hurting business sentiment; today's decision was in response to risks to japan's economy and prices; negative rate policy doesn't show we've reached jgb buying limit; today's decision does not indicate limit in boj's qqe; negative rates, jgb buying will lower short and long end of yield curve.'
Data to be released:
Australia AGI manufacturing index, TD securities inflation, China manufacturing PMI, non-manufacturing PMI, Japan manufacturing PMI, Swiss manufacturing PMI, France manufacturing PMI, Italy manufacturing PMI, Germany manufacturing PMI, Euro zone manufacturing PMI, U.K. manufacturing PMI, mortgage approval, U.S. personal consumption expenditures, personal spending, personal income, construction spending manufacturing PMI and Canada manufacturing PMI on Monday.
Australia interest rate decision, Swiss retail sales, Germany unemployment rate, unemployment change, Italy unemployment rate, Euro zone unemployment rate, producer price index, U.S. Redbook and ISM New York index on Tuesday.
New Zealand unemployment rate, job growth, Australia AIG service index, building permits, imports, exports, trade balance, China service PMI, Japan consumer confidence index, Italy service PMI, CPI, France service PMI, Germany service PMI, Euro zone service PMI, retail sales, U.S. mortgage applications, ADP employment change, service PMI, non-manufacturing PMI, participation rate and labour cost index on Wednesday.
Australia business confidence, Swiss consumer climate, U.K. Halifax house prices, U.K. Bank of England rate decision, MPC vote, U.S. initial jobless claims, unit labour cost, productivity and factory order on Thursday.
Australia retail sales, Germany factory orders, France imports, exports, trade balance, U.S. unemployment rate, non-farm payroll, average earnings, private payrolls, manufacturing payrolls, participation rate, trade balance, Canada imports, exports, international balance, participation rate, net change in employment and Ivey PMI on Friday.
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