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Asian Session – Yen posts slight gains on steady Bank of Japan; euro steady

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15908390The Bank of Japan meeting failed to deliver any surprises, as the Bank reaffirmed its optimism about a moderate economic recovery taking place, led by exports and industrial production.  Consumption on the other hand could be doing better.  Core inflation excluding the effect of the April sales tax hike was on track to be low at 0.5%, although the forecast was for inflation to rebound to around 2% in fiscal year 2015/2016.  Governor Kuroda reiterated his commitment for additional stimulus if there were adverse price developments, while maintaining the 80 trillion yen annual pace of monetary stimulus in place since October.  Analysts expect the BoJ to add to its stimulus later this year.

The yen gained a little after the BoJ, with dollar / yen moving towards 119 (but staying above it), while euro / yen backed down slightly after the previous day’s outsized gains to trade at 135.78.

The standoff between Greece and its creditors continued with scant signs of progress since Monday’s acrimonious Eurogroup meeting.  Greece was set to ask for a 6-month extension of the loan agreement and not the bailout itself, while a key ECB board meeting today will decide whether to extend the access of Greek banks to liquidity.  The euro was trading around the 1.14 area while awaiting further developments.

The S&P 500 traded at a new all-time high the previous day, which was an indication of the positive risk sentiment.

Looking ahead, the main economic data that the market will expect during the European Session will be UK employment statistics.  The emphasis will be on wage growth, to check whether price pressures are beginning to build up.  Such a development could influence the Bank of England to begin raising rates sooner-than-expected.  Bank of England minutes to be released afterwards could signal what the bank’s policymakers are thinking.  Later during the US Session, the minutes of the January Federal Reserve policy meeting will be closely scrutinized for hints on how the committee intends to move on interest rates.

 

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