Friday March 3, 2006 - 08:05:19 GMT
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Tricom Futures and Foreign Exchange -
Forex: The ECB finally moves, now for the BOJ
The yen fell on Friday after Japanese data showing core inflation picking up to the fastest since March 1998 did nothing to shake expectations the yen would stay a low-yielding currency for a while yet. Japan's core consumer price index rose 0.5 percent in January from a year earlier, beating forecasts and giving the clearest sign yet that the economy is finally escaping nearly a decade of deflation.
Armed with the data, the Bank of Japan is expected to scrap its super-loose "quantitative easing" policy, possibly as soon as its policy meeting ending next Thursday. But even after such a move overnight rates are seen holding close to zero.
Overnight, the ECB lifted rates to 2.5 percent, a three-year high, and investors see the central bank pressing on with more credit tightening. Markets are putting a roughly 30 percent chance on rates climbing to 3.25 percent by year end. Such a series of rate increases might erode the dollar's advantage that powered its 15 percent rally against the euro and the yen last year.
The USD remains under some pressure going into Europe today, but I can't see it being a wholesale sell-off. More like a continuation of the recent choppy, range-bound price action we've been seeing for most of the last 6 weeks.
Today's Economic Release:
US: Michigan Consumer Sentiment
US: Non-Manuf. PMI
Today's Top Trades
Sell USD/CHF on a break under 1.2970
For more ideas send me an email, [email protected]
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