Bank of Japan saves the global bond market

18 November, 2016

Pound escapes the red zone as the Dollar retreats, as the Retail Sales signal an expansion in the UK consumption. MoM change in Retail Sales has been showing no evidence of a sustained adverse effect from Brexit on the UK consumers, although the formal exit process containing concrete changes has not been triggered yet. The employment data shows a consistent decline in unemployment,  what proves that the UK economy remains resilient to the Brexit challenges.

Australian Dollar trades in a narrow band as the employment figures are mixed, which doesn’t trigger any direct response from the currency market.

The Greenback is off-balance after scaling above the 13-year peak on Wednesday, as the anticipations of the FED moves towards a tightening, forcing investors to hoard more Dollars.  The FED is seen to hike the rate by 25 b.p. with 90.6 percent probability, according to futures data from the CME group. FED head’s Janet Yellen testimony is due to later today, which seeds anxiety among the investors as it has been not quite clear if the unexpected victory of Donald Trump for the White House affects plans of the financial policymakers.

The Japan Central Banks halts on the bond market announcing debt buyout in unlimited amounts at a fixed rate. This step is a part of the BoJ policy to target bond yield curve, which has been painting a depressing image in the light of the recent career for higher yields.

“Interest rates may rise in the United States, but this does not mean that we should automatically allow the interest rate increase in Japan after them”, said the head of the Bank of Japan, Haruhiko Kuroda. Japan’s intervention encouraged bonds rally across the world. Bond yields in Japan, Germany, Australia US and other countries plunged signalling a renewing demand, while the safe heavens assets pared some declines. Gold rose by 0.49% drawing nearer to a resistance zone of $1,330. The Japanese Yen and Swiss Franc also gained, both trading in a green zone against the US Dollar.

Buyers expanded activity on crude oil forming a sustained rally after the recent decline. Traders are waiting for the news from Doha where oil producers will seek remedies from the persistent global oversupply. Output freeze agreement has been yet remaining the subject of speculations as there is no unity between cartel members on this matter.


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