BoJ And BoC Kept Policy Rates Unchanged
The risk sentiment was mitigated overnight. As widely expected, the BoJ kept its policy rate unchanged at 0.10% however rejected the proposals for more easing and the immediate start of the open-ended asset purchases. March 1st data showed that Japanese investors sold Yen441.7B in foreign stocks, Yen885.4B in Foreign bonds, while foreign investors bought Yen269.6B worth Japanese stocks and Yen 657.8B in Japanese bonds. The official reserve assets fell to USD 1,258.8B equivalent from USD 1,267.3B in February. The Nikkei 225 added a tiny 0.30%, JPY consolidated yesterday's weakness in Asia. USDJPY fell from 94.12 to 93.80 post-BoJ announcement.
In China, Hang Seng and Shanghai's Composite retreated as the February trade balance is expected to show deficit due to shrinking exports. In Australia, the trade deficit was more than doubled in January. The S&P/ASX200 wrote-off 0.15%, AUD traded one leg down. Elsewhere, Taiex added 0.13%, while Kospi index lost 0.81%.
In US, the employment change has been better than expected in February. US economy added 198'000 workers, compared to 170'000 expected. The S&P500 and Dow Jones Industrial index added 0.11 and 0.30% respectively, ahead of NFP data due tomorrow.
Bank of Canada kept its rate unchanged at 1.0% and stated that the rates are likely to stay at these low levels to boost the recovery as inflation remains muted. BoC added a “considerable” withdrawal of stimulus is likely afterwards. CAD slightly recovered from its 8-month low versus USD.
EURUSD retraced yesterday's sell-off as the Portugal's credit rating outlook was raised from negative to stable by S&P. EURUSD tested 1.30 early in European opening ahead of ECB rate announcement at 12:45 GMT. The ECB is expected to keep the policy unchanged, yet the past three meetings (where the policy rate was also kept unchanged), the FX markets have seen large moves and we expect the same pattern for this afternoon's meeting.
The other important policy annoucement is scheduled in UK (12:00 GMT). GBPUSD slid below 1.50 as more QE is expected out of today's BoE meeting. EUR saw decent demand in Asia against GBP. EURGBP traded one step up around 0.8660.
Today, the markets focus on the ECB and BoE rate announcements, which will probably inject decent volatility in the currency trading regarding the previous ECB meetings. Caution is key for any action at this level of high speculation in FX markets.
The economic calendar consists of Swiss February Unemployment Rates and Foreign Currency Reserves, Norway January Industrial Production, Us Initial Jobless Claims and Continuing Claims, US January Trade balance, Canadian January International Merchandise Trade and Building Permits m/m.