Market Drivers for March 11, 2014
- BOJ keeps policy steady
- EZ Trade Balance misses
- Nikkei 0.69% Europe .31%
- Oil $101/bbl
- Gold $1347/oz.
Europe and Asia
AUD: NAB Business Confidence 7 vs. 9
JPY: No Change from BOJ
EUR: EZ Trade Balance 17.2B vs. 19.3B
GBP: MP 0.4% vs. 0.3%
GBP: IP 0.1% vs. 0.3%
North America
USD: JOLTS 10 AM EST
Currencies had another lackluster night of trade with majors contained to very narrow ranges for the second day in a row as markets were content to hold steady amidst very little newsflow. In Japan the BOJ monthly meeting produced no fresh initiatives as the central bank maintained its policy of QE.
BOJ Governor Kuroda noted that the Japanese economy was on track for its 2% CPI growth and that capex will continue to rise moderately as the year progresses. Mr. Kuroda reiterated that yen weakening was instrumental in pushing inflation higher and once again reaffirmed that the BOJ will not hesitate to adjust policy if obstacles emerge to meeting its price target.
However, the BOJ failed to announce any fresh stimulative measures and although the markets were not anticipating any policy adjustment at today's meeting, USD/JPY nevertheless sold off slightly to 103.22. The pair remains relatively well supported at the 103.00 level and may not move much until Thursday's US Retail Sales report as markets try to gauge the strength of US economic activity. For now, USD/JPY has formed a clear bottom at the 101.50 level, but may have difficulty making its way toward the 105.00 yearly highs until markets become convinced that US growth is sustainable and US benchmark 10 year yields move closer to 3%.
Meanwhile in Europe, the EUR/USD is treading water near the 1.3850 mark, sliding slightly lower as the morning progressed. The eco calendar was very quiet with only the GE Trade Balance on the docket. The trade surplus missed the forecast just slightly, printing at 17.2B versus 17.7B eyed, but exports grew at a very respectable 2.2% pace and the decline was due to a large jump in imports of 4.1%.
Overall, the trade data out of Germany continues to show very impressive performance and is one of the reasons the EUR/USD remains near yearly highs. Still, the pair may stall at these levels, especially if US data shows some improvement and the market begins to price in a much restricted US monetary policy. For now, the EUR/USD looks like it will remain rangebound between 1.3800-1.3900, but a break to the topside will likely catch the shorts flat-footed and euro could catapult through the key 1.4000 level on sheer momentum alone.
Lastly, cable also remained steady holding above the 1.6600 mark as BoE Governor Carney testified in front of Parliament. Mr. Carney once again tried to dampen interest rate expectations as he noted that any rate hikes will be gradual and limited in nature. The BoE is keenly aware of cable's recent strength which it considers to be a threat to the UK recovery especially the country's export sector. Nevertheless, UK economic performance appears to be expanding at a steady rate and markets anticipate that the BOE will be the first amongst the G-7 to hike rates, which should continue to provide support for sterling.