BOJ Actions Pressure Yen
The dollar held recent gains despite a rise in stocks and commodities. The Bank of Japan said on Tuesday that it would provide 10 trillion yen ($115 billion USD) at a rate of 0.1% to stem deflation and prevent another recession in the already troubled Japanese economy. The Japanese government is expected to provide a stimulus package to shore up the economy. Barclays Capital’s Yamamoto stated, “The focus now shifts to the government and the size of the supplementary budget and whether there will be any action by the Ministry of Finance in the foreign exchange market.”
UK Emerging From Recession
The pound held on to yesterday’s gains against the US dollar and rose against the weak yen. Bank of England chief economist Spencer Dale said that the UK economy is emerging from the recession but cautioned that a number of factors could hinder recovery. He also said that stimulus programs combined with a weaker pound have supported recovery and said that credit is likely to remain tight. The Bank of England will hold its next policy meeting on December 10th. Many traders and investors are waiting for the results of the European Central Bank meeting on Thursday. The bank is expected to keep rates at 0.1% and announce that December’s 12 month funding will be the last. Carsten Brzeski of ING Financial Markets said, “The meeting should witness the very first steps towards the exiting of super-loose monetary policy. Even though the prospect of rate hikes any time soon remains distant, the ECB will start gradually unwinding its non-standard measures.”
Upcoming Data
Traders will also be watching US job figures, due Friday, closely. The report by Automatic Data Processing is expected to show that 155,000 jobs were lost in November compared with 203,000 jobs lost in October.
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