The initial dollar strength following the FOMC on Wednesday was partially unwound as it looked like the bull run was struggling to shift up a gear. If there was ever any doubt in the mind of the dollar bulls it will have been laid to rest earlier this morning by the Bank of Japan who unexpectedly increased monetary stimulus taking almost everyone by surprise, not because further measures were not expected, but because it was thought the BOJ wouldn’t move quite so soon. USDJPY has not only smashed through 110.00, but beyond and now trading above 111.00 at 111.20, an almost seven year high.
The move by the BOJ was not only unexpected, but shows the divergence between the major Central Banks around the globe as the Federal Reserve has just ended monetary stimulus and the BOJ is speeding up the printing presses. USDJPY broke out of its multi-year downward trend back in September and this move today only confirms the end of that trend.
We will also focus on Eurozone CPI data out today where CPI is due to lift a little. Yesterday slightly better than expected economic sentiment data was widely welcomed and put a stop to the EURUSD move lower so this morning we will see if 1.2550 can hold over the release of the CPI figures. There is great debate over the state of the Eurozone as Germany drags its feet whilst the laggards such as Portugal, Spain and even Greece are showing tentative signs of improvement.