The Bank Of Japan's Decision To Allow 10-Year Government Bonds Caused Turmoil In The Financial Markets, USD/JPY Trading Below 133
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The US Dollar index retreated following the BoJ policy announcement helping EUR/USD edge higher. Later in the day we have US building permit data which could reignite some bullish behavior in the US dollar. Moreover, forex traders focused on the Japanese yen today, which jumped on key Bank of Japan (BoJ) policy.
EUR/USD
The EUR/USD pair also gains today, receiving a trade above $1.06. Currently, trading is in the range of 1.0630-1.0640.
This morning we heard comments from ECB policymaker Nagel who stated the Central Bank is still a long way from hitting its inflation goal reiterating that the ECB likewise need to be persistent on rates.
Yesterday’s upbeat German IFO survey on Business Climate and this morning drop in German PPI, which hit a 9-month low.
Improving data coupled with a slightly hawkish ECB turn last week may speak in favor of a continuation of the current EUR/USD rate.
At present, the mood remains bullish.
USD/JPY
USD/JPY dropped sharply today from trading above 137 to below 134. The pair is now trading below 133, 132.6420 to be precise
The Japanese Yen launched higher after the Bank of Japan tilted monetary policy at its meeting today.
The USD/JPY Pair has raced to a four-month low. The pair tried to break above the upper band of a descending trend last week but was unable to do so. Today’s attempt was also unsuccessful and the BoJ’s announcement aided maintenance of the trend channel.
All of this contributed to the couple's sentiment, which is currently bearish.
Most BOJ watchers had expected no changes until the current governor Haruhiko Kuroda's 10-year term ends at the end of March. While it kept broad policy settings unchanged he BOJ decided to let long-term yields to move 50 basis points either side of its 0% target, wider than the 25 basis point band previously.
The move has had a negative impact on the US dollar and could boost the Yen as Japanese investors are given an incentive to bring money home while increasing the Yens haven appeal.
AUD/USD
The price of the Aussie pair was above the 0.6725 level at the beginning of the day, but then fell below $0.67. Trading is currently in the range 0.6665- 0.6670
The Australian dollar fell above $0.67 to its lowest level in a month after the Bank of Japan's surprise decision.
The Australian was also under pressure as other major central banks offered a more hawkish outlook on policy than markets anticipated, adding to fears of a potential recession next year.
Meanwhile, recent minutes from the Reserve Bank of Australia's meeting revealed that policymakers were considering a bigger rate hike of 50 basis points.
GBP/USD
At the beginning of the day, cable trading was very mixed. The price of the pair traded above $1.22 and then fell all the way down to $1.2088. Currently, the price is stabilizing in the range of 1.2150-1.2175. The overall picture of the pair looks bearish and the price trades mostly above $1.21.
The pound posted a slight gain on Tuesday in weak trading ahead of Christmas, but was on track for its biggest quarterly gain against the dollar since 2009.
The pound is up 8.8% against the dollar in the last three months of the year, putting it on track for its best quarter in more than 13 years.
Goldman Sachs expects the pound to fall to $1.07 in three months and hold at $1.11 in six months.
Source: investing.com, dailyfx.com, finance.yahoo.com
