Market Drivers for October 4, 2013
Markets adrift as no NFPs
BOJ stick to script offers nothing new at presser
Nikkei -0.94% Europe .46%
Oil $103/bbl
Gold $1315/oz.

Europe and Asia:
JPY BOJ Presser
EUR GE PPI -0.1% vs. 0.1%

North America:

Currency markets were adrift on the last trading day of the week with little new economic data or fresh political news on the docket. Cable was the weakest major of the night coming under heavy profit taking pressure after it long and sustained rally over the past several weeks,

The pair tumbled through the 1.6100 level as heavy selling on the crosses against the Aussie and the euro contributed to the selloff. Although economic data from UK has continued to show impressive results, the latest batch of PMI has seen a slight deceleration in activity and that provided the market with an excuse to take profits in the long sterling trades.

The only event risk of note today was the BOJ monthly meeting but it produced no news as Governor Kuroda essentially stuck to the well known script. Mr. Kuroda stated that the current BOJ policy was accommodative enough to meet policy targets, but he noted that the central bank stood ready to respond in case of any tail risk.

Mr. Kuroda also expressed concern about US fiscal stand-off stressing that it could be destabilizing if it continues for much longer. He reiterated the BOJ is making progress towards in 2% inflation goal and highlighted the fact that business sentiment has improved as evidenced by the latest Tankan reading.

USD/JPY saw little response to the presser as it tested the lows near the 97.00 level but remained supported at that figure, The pair remains in a deep downtrend hobbled by the ongoing crisis is Washington DC that has put strong selling pressure on the buck. However, it appears that the 97.00 exchange rate is a key support level for Japanese policymakers and that they are becoming increasingly concerned about the possibility of a drift lower towards 95.00 which could begin to hurt the recovery in the key export sector.

With US government on shutdown the much anticipated Non-Farm payrolls report will not be released today. That has left the markets in lurch as they will miss the key data point from the US economic calendar. Although the dollar bounced today in Asian and early European trade mainly on profit taking by the shorts the lack of progress on the budget negotiations is likely to put renewed selling pressure on the greenback if we go into the week-end with no signs of resolution. On the other hand, as public patience for gamesmanship clearly begins to reach its limit the prospect of a deal could provide the dollar with a lift if markets get some encouraging rhetoric from Washington DC. Thus like much of the country, the currency markets remain dependent on political rather than economic developments.

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