Currency markets saw some of the biggest moves in the previous session with weakness in the Japanese Yen showing some of the most activity and United State Dollar and Japanese Yen and Euro and Japanese Yen in particular marching higher. Some selling pressure was initiated by Japanese export companies in an attempt to slow the rises but the bull side won out with both pairs posting new highs for the week. Part of the explanation for these moves is being attributed to the upcoming Federal Reserve meeting, where a dovish bias is expected by many (a net positive for equity markets and high yielding currencies).
Macro data yesterday showed that the Trade Balance in Japan moved into negative territory (creating the first deficit recording since 1980) and this is also adding to the selling pressure in the Japanese Yen. The main driver in the United State Dollar and Japanese Yen will be the Federal Reserve meeting, where markets will look to assess the Federal latest interest rate forecasts. We are likely to get a long term projection from the Fed (inline with trends from recent months) and any suggestion that interest rates will remain low will likely initiate a rally in global stock markets.
A press conference from Fed Chairman Bernanke will follow the rate decision and most of the questioning from the attendant journalists will likely center on the possibility of additional quantitative easing stimulus for the United State economy. While it is unlikely that there will be any direct suggestion of a third round of Quebec Electronics, the Eurozone debt crisis will likely be enough of a reason to leave all possibilities open. Any hint of stimulus, however, would be a market positive, especially for private banking stocks.
Overnight, we did see some inflation data out of Australia, with the Consumer Price Index showing a higher core reading, helping propel this week’s rally in the Australian Dollar. In the Eurozone, flash data came in higher than market estimates at 50.4 for January (against estimates for 48.5 and 48.3 previously). The data is encouraging for the region, as it shows that economic activity is showing signs of stabilizing. All sub-components of the report showed strength, with manufacturing, employment and business expectations all pointing higher.
Searching forward, the following primary macro financial spread betting release would be the United Kingdom Gross domestic product numbers and also the moments in the newest Bank of England (BoE) financial coverage conference. The Bank of England moments are required to exhibit a unanimous choice to create no modifications to the property purchase plan and also to leave rates of interest on hold. choices an additional region to look at within the launch, and then any dissenting votes will probably weigh around the British Pound, especially from the United states Dollar.