Weakness in JPY was observed overnight as USD/JPY retook the 120.00 handle and continued in this vein during the European session with the pair breaking through the 200 DMA at 120.83 and seeing the session out in close proximity to the 121.00 handle. This came as a result of Japanese PM Abe announcing that he would cut corporation tax by 3.3% or more, causing the Nikkei 225 to soar, closing 7.7% in the green. The JPY weakness was also met with softness in EUR amid an unwinding of safe-haven bids which subsequently supported the USD throughout the session.
USD/CAD was a notable mover following the Bank of Canada’s rate decision to keep rates on hold despite some minor outside calls for a 25bps rate cut by BNP. The main source of price action for the pair stemmed from accompanying comments with the bank stating that effects of the previous rate cuts conducted by the bank are still feeding into the economy, which subsequently saw CAD gain some ground against the USD.
Today sees the release of BoE Minutes. In terms of the vote split itself, analyst estimates are expecting to see an 8-1 vote split with McCafferty set to remain as the lone dissenter. However, some analysts have noted that there is an outside chance of Forbes or Weale joining McCafferty in dissenting and analysts at Morgan Stanley even suggest there is a moderate risk of Haldane voting to cut rates. As such, the comments from the minutes could potentially provide the bulk of any potential market reaction with focus on how the bank perceives ongoing concerns surrounding China and the low levels of UK inflation.