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BoJ rate hikes leave traders unmoved; US data awaited July 14th – the long awaited news from the Bank of Japan that interest rates would move away from the ultra-lax levels we’ve seen for the last six years may have given the Yen some upside in the short term but any gains proved to be woefully short-lived, underlining the fact that this news had been accounted for and essentially fully priced into the market in recent days. Although the central bank has also said that further rate increases are to be expected, the wording of this statement has left many to believe that any change won’t be rushed in and as such, divergence between dollar and Yen yields is set to continue for some time yet. Concerns over just how sustainable US growth is going to be could however start to drag against the dollar in due course so we can expect data from Washington later today to be closely watched as the market continues to try predicting when US rates will peak. With both Michigan sentiment and retail sales data due for release, this should offer another indication as to the health of the US economy. Although soaring oil prices will continue to buoy inflation and in turn offer the FOMC one more reason not to start cutting rates just yet, with a slowing labour market it does seem questionable as to precisely how much more support we can expect to find for the greenback in the longer term. Tim Wilbraham and Enis Mehmet Phone USA: + 1 212 644 4220 Phone UK: + 44 207 170 8201 Fax USA: +1 212 644 4222 Website: http://www.cmcmarkets.com
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