Yen weakens as BOJ stands pat

20 December, 2016

The Bank of Japan (BOJ) left policy unchanged on Tuesday at the conclusion of its two-day policy meeting, as widely expected. The central bank maintained the negative 0.1 percent interest rate imposed on banks for some excess reserves, left the 10-year Japanese government bond yield target at around zero, and kept annual rises in JGB holdings at 80 trillion yen. The BOJ also upgraded its economic assessment, revising up its views on exports and output, while noting that the economy continued to recover moderately. The outcome was negative for the yen.

At least 12 people were killed and around fifty more were injured in what many are calling a terror attack. One man thought to have been the driver has been arrested while a passenger died as it crashed into shoppers. Berlin police released on social media that the vehicle which is Polish owned was loaded with steel and may have been stolen from a construction site. The attack had a minor impact on the EURUSD, but may be turning point going into 2017. Let us recall that both France and Germany prepare for the elections. Another attack conducted (probably) by an immigrant will strengten the populists and may lead to a major shift in European politics. 

The calendar today is not especially loaded and investors are left with some minor releases. However, these might not necessarily be irrelevant, especially for less popular currency crosses. Like EURSEK. Better data means that Riksbank has reasons no to be overly aggressive. If the Bank extends the QE but stops short from making a cut, the EURSEK could move towards a support at 9.68.

The Reserve Bank has hinted it is content to leave interest rates alone for the time being, warning about high levels of household debt sparked by a borrowing binge on lower rates, minutes from its December policy meeting shows. The AUDUSD popped a bit and the AUD was the only currency that didn’t weaken the dollar overnight. Looking at the chart we may notice that the AUDUSD is now close to breaking below an important support an if that happens, a move towards 0.7100 will be likely.


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