We have seen fresh year highs on USDJPY at the start of the European session as the 115.59 level is broken, with 116.00 not far away. The pattern on the yen for the past several years has been range trading for months, followed by more pronounced moves and the underlying dynamics appear to be supporting such a pattern of trading at this point in time. The market continues to bask in the Bank of Japan’s announcement of two weeks ago, together with the pledge from the main pension fund to buy more domestic and overseas equities. But the positive impact on the economy of a weaken currency are having a harder time asserting themselves. The Aussie has also weakened against a US dollar looking a little more assured towards the end of the Asia trade, with AUDUSD just above the 0.8600 level.
If we look at the data calendar for today, then it suggests we are in for something of a quiet session with no major releases scheduled, but price action on the yen suggest that the market is still keen to push further on some underlying trends. It’s notable that sterling is holding steady, with players reluctant to push lower ahead of the Bank of England Inflation Report tomorrow. Finally, keep an eye on EURCHF, which has continued to nudge lower towards the SNB’s 1.20 floor. At some point, something will have to give. It’s unlikely to be the SNB’s resolve that gives first, so we can expect the SNB to up the rhetoric and buying of reserves before long.