Yen Weakness Continues As USD/JPY Heads To 100

The yen remains the focus in today's Asian session as the USD/JPY edges even closer to 100 psychological level, and the EUR/JPY is just an inch below 130. The NZD/JPY remains the strongest cross this week, as the kiwi was boosted by comments from RBNZ deputy governor Spencer that house price and credit expansion could trigger monetary policy response. The euro caught up with EUR/JPY as the second strongest pair this week. Euro is a little firmer broadly, with the EUR/USD staying well above 1.3, while some strength is also seen in EUR/GBP and EUR/CHF. The AUD/JPY is also strong, supported by China inflation data.
In the U.S., Fed chairman Bernanke said that the economy is "significantly stronger than it was four years ago" but is still "far from where" it should be. He said that "most of the world's major industrial economies are engaged in expansionary monetary policy and on net; I think that's mutually constructive." Meanwhile, "resilience" of U.S. banking system has "greatly improved" since the stress tests. He noted that the more intensive use and greater sophistication of supervisory stress testing, as well as supervisors' increased emphasis on the effectiveness of banks' own capital planning processes, deserve some credit for that improvement."

In Europe, Spanish prime minister Rajoy urged that ECB leaders should confider whether ECB should have the "same power" as other central banks and "give ourselves the instruments that other countries have". Rajoy was indeed referring to the fact that Fed and BoE could print money through quantitative easing, and that the BoJ could implement a huge monetary stimulus package. While the ECB still has a wide range of tools, it must justify any unconventional measures by aligning them with the single mandate of price stability. Portugese Finance Minister Gaspar said that the troika will "make an additional visit" after the constitutional court rejected a number of austerity measures last week.

China's CPI, which was released today was much lower than expected: 2.1% yoy in March while the PPI dropped -1.9% yoy. Expectations were of 2.5% yoy and -1.8% yoy respectively. The data showed there is little inflationary pressure, which would help China to maintain a relatively accommodative policy for now. Other data released in Asian session saw U.K. BRC sales monitor rose 1.9% yoy in March, RICS house price balance improved to -1 in March. Australian NAB business confidence rose to 2 in March.

Looking ahead, U.K. data will be a major focus today. Industrial and manufacturing production and trade balance are featured. The Swiss will release unemployment rate, CPI and retail sales. Canada will release housing starts and building permits.