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  • richard evans

Yen on the move as BoJ take markets by surprise

Good morning


Well so much for quiet pre-Christmas markets. We saw GBPUSD trade up to 1.2220, then drop to 1.2085 early this morning, EURUSD moved up to 1.0650 before falling to 1.0580 around the same time. The big move however was in JPY after the BoJ rate meeting, with Yen rising sharply from 137.50 to 132.25 currently. That’s a serious move. GBPJPY and EURJPY followed suit of course which could explain their brief weakness, although both GBPUSD and EURUSD have returned to 1.2180 and 1.0630 respectively.


The reason for the move was BoJs surprise decision to widen the the yield curve to -0.50%/+0.50% from -0.25%/+0.25% previously. In simple terms this constitutes some potential tightening, sending Nikkei sharply lower to close down around -2.5%. There had been talk before the meeting that the inflation target could be tweaked, this had been denied and did not happen but there is no smoke without fire and we will be on alert for such an announcement in the future.


RBA minutes showed they considered pausing the rate rise cycle at the last minute, although they also considered a raise of 25 or 50bps. They say they welcome the recent dip in CPI but that upside risks still remain and they stand ready to act if needed, with larger rate rises a possibility. GBPAUD traded up to 1.8275 briefly but is now trading just around 1.8200, with AUDUSD back at pre-release levels having been bounced around during the BoJ surprise.


GBPZAR traded down from 21.55 to just around 21.00 yesterday, ZAR trading higher after Ramaphosa was re-elected as President by a decent margin. ZAR has managed to hold those gains and looks steady around 21.00.


Some US and Canadian data this afternoon, for the record USDCAD is 1.3630, ity has struggled several time over the past couple of weeks on any approach to 1.3700 and I presume we will see USDCAD sellers on any CAD weakness, but watch for buy stops above 1.3700.


That’s all for now….


- 13.30 US building permits, housing starts

- 13.30 CAD retail sales

- 15.00 EU consumer confidence



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