BOJ deflation fight, loosened the Policy hold

Tuesday, January 19, 2010


Yen was further down today, as pairs were focused on the JAL’s expected bankruptcy announcement (0800GMT). The Dollar continued it’s gain as Forex investors are rallying their speculation that the company will file for bankruptcy resulting in more data proving that the Japanese economy is continuing to fall and with the Bank of Japan’s recent announcement that they will fight deflation, results in further loose monetary policy. But with the US waking from its recent holiday, investors might be slow in their trading activity today

CAD/JPY – 64 pips (87.96-88.58); AUD/JPY – 95 pips (83.27-84.22);
USD/JPY – 46 pips (90.61-91.05); GBP/JPY – 137 pips (147.51-148.88)


The UK Consumer Price Index Report for December is due this morning (0930GMT). This is an important indicator for the emerging inflation trends and further monetary policy. Inflation pressures have been rising because of the rising commodity prices, sterling weakness to name a few. For example, in December, Core Producer output prices rose by 0.7% - the biggest monthly gain since May 2008. These emerging pressures, together with the possibility that some retailers could raise prices ahead of the VAT increase on 1 January, raise the likelihood that inflation rose further last month.

GBP/USD – 128 pips (1.6249-1.6377); EUR/GBP – 52 pips (0.8780-0.8832)
GBP/CAD – 94 pips (1.6719-1.6813); GBP/JPY – 137 pips (147.51-148.88)


The Bank of Canada Interest rate (1400 GMT) should show this old benchmark rate to remain at its record low today of 0.25% and repeat the pledge to leave it unchanged through June as an appreciating currency threatens to hamper the economic recovery.
“Any suggestion they will raise rates before the U.S. would probably drive up the currency, and we’ve already had concern from the bank that the very high dollar would derail the recovery,” said Pedro Antunes, director of economic forecasting at the Conference Board of Canada in Ottawa. “They will be hesitant to make any changes” today, he said.

USD/CAD – 66 pips (1.0246-1.0312); EUR/CAD – 63 pips (1.4737-1.4800);
AUD/CAD – 64 pips (0.9452-0.9516)



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