The main overnight move has been on the yen after the latest Bank of Japan meeting. The major policy parameters were left unchanged, but the BoJ did double the scale of two measures designed to boost lending in the banking sector. Both schemes were due to expire shortly and have been extended for another year. This modest move was taken as a sign that the BoJ are still prepared to push forward in their desire to pull the economy out of the deflationary mind-set that has gripped it for most of the past 20 years. Stocks were given a boost and the yen weakened, USDJPY back above the 102.50 level. GBPJPY moved further above the 170 level, having seen only 3 down days since February 4th.
We cannot ignore sterling today. Cable made a brave and brief push above the 1.68 level early yesterday, but has since settled back, looking quite stretched on the daily charts. Today sees the release of CPI data, but the significance of this has now diminished with inflation having returned back to the bank’s 2.0% target where it is expected to remain today when data is released at 09:30 GMT. The bigger focus is with tomorrow’s labour market report and minutes to the February meeting, where there was no doubt much debate regarding the adjustment in forward guidance announced at the inflation report. Sterling could get some support from firmer inflation, but on balance near-term weakness appears to be the greater risk after recent gains.
Finally, note that the Aussie dollar initially climbed after the release of the latest RBA minutes, which further underlined that official interest rates were not likely to be moving for the time being. Growth and inflation forecasts were revised higher, which helped the better tone to the Aussie, but this was not sustained through the Asia session, AUDUSD back to the 0.9030 level after a push to the 0.9080 level early on.