The tail end of last week was dominated by a number of forex data releases, rates decisions and pivotal speeches. This sequence began on Wednesday morning with the Bank of Japan’s interest rate decision markets awaited action. This early morning start was followed by a collection data from the FOMC which both looked forward to the future prosperity of the US’s economy, delivered the current interest rate decision and concluded with the FOMC press conference.
Thursday saw speeches from Mario Draghi and Governor Mark Carney who touched upon the future of green investments in the global market place.
On Wednesday markets were left unsatisfied by Haruhikos Kuroda and the Bank of Japan’s decision to leave interested rates at a -0.10, many insisting that a -0.20 was needed in order to provide the economy with some level of stimulation. Instead the Bank opted to focus on the its bond yield curve targeting a yield of 0 on the 10-year bond. With the view of weakening the currency.
Following the announcement, the Yen weakened from 0.0986 against the USD to 0.00974 the desired effect was however short lived and the JPY regained all of its losses against the greenback and closed the week on roughly 0.0099.
Wednesday evening was dominated by the FOMC which as many anticipated left rates on hold. Markets will now look forward to Decembers decision were many anticipate a 0.25 rate hike is very likely. Yellen insisted the decision to leave rates unchanged was not due to lack of confidence in the strength of the economy. She went further saying the job gains had been solid, whilst also mentioning that inflation indicators were also being monitored. Highlight that one concern related to business fixed investment which had remained weaker than desired.
In relation to future the FED revised their long-term interested rate targets from Junes figure of 3% to 2.9 highlighting the rate at which interest rates could rise. Projected growth for 2016 was also cut slightly to 1.8 from 2%, whilst inflation targets in the final quarter were amended from 1.4% to 1.3%.
Following the releases and announcements USD/EUR depreciated significantly moving from 0.897 to a week low of 0.8894 on the Thursday.
The continuing loss seen by USD dollar was probably not assisted in any part by Mario Draghis resounding speech. Taking to the stage the ECB president highlighted that the European Central Bank were now seeing the benefits from low interested rates in higher asset prices, lower loan default rates and greater appetite for lending. He also looked to banks to tighten the margins between the levels of interest offered by banks to savers and the rates offered to borrowers. He also warned that the crowded banking sector was damaging the Banking sectors profitability.
The ECB claims were backed up at the end of the week with positive Forex data releases from French and German manufacturing figures and the positive Eurozone Flash PMI number.