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Japanese Yen weakness gains momentum
Information is not investment advice
XAU/USD: Gold facing a further consolidation above 23.6% retracement area. Bulls try again to gain control.
Ichimoku Kinko Hyo
EUR/JPY: The pair is trading above the cloud. An upward pressure would lead the pair to exit further the cloud, confirming a bullish outlook.
US Market View
World stock prices held near record highs on Wednesday, while U.S. bond yields flirted with their lowest levels in a month, as investors bet the Federal Reserve is some way off from tapering its economic stimulus. U.S. payrolls data last Friday showed hiring did not grow as fast as economists had expected, despite growing signs of a labour shortage.
The U.S. central bank has said rises in inflation this quarter would be transient and would not threaten price stability, one of its key mandates. Thursday's U.S. consumer price data is expected to show the overall annual inflation rate rose to 4.7% and core inflation increased to 3.4%. While those readings will be well above the Fed's inflation target of 2%, many economists expect the inflation rate to ease in coming months, allowing the Fed to wait before taking any tapering measures.
Inflation data from China showed its producer price index jumped 9.0% from a year earlier, the highest in over 12 years, on surging commodity prices. The rise in consumer prices, however, was softer than expected, helping to mitigate concerns. While China's central bank is slowly scaling back pandemic-driven stimulus, top leaders have vowed to avoid any sharp policy turns and keep borrowing costs low.
The dollar clung to marginal gains in early European trade Wednesday, but volatility was limited with traders awaiting upcoming U.S. inflation data and an ECB meeting for clues about future central bank policy. The dollar has been on a downtrend for much of the last year, but investors are starting to get nervous that rampant inflation could force the Federal Reserve to taper back its ultra easy monetary policies earlier than previously guided. This would result in rising interest rates and a more buoyant greenback.
Thursday also sees the latest policy decision by the ECB, with the central bank widely expected to keep in place its ultra-loose monetary policies given the region has yet to generate inflation at anything like the levels seen across the Atlantic. That said, the euro is likely to be sensitive to changes in the bank's economic forecasts or any signal that the pace of bond buying could be reduced in months ahead.
USA Key Point
- Germany April trade balance €15.5 billion vs €16.3 billion expected.
- Germany reports 3,254 new coronavirus cases, 107 deaths in latest update today.
- China is considering price controls on coal prices.
- China state planner promises intervention to keep inflation in certain goods down.
- US Republican senators said made “a lot of progress” in infrastructure talk.
- UK Chancellor Sunak wants City of London exempt from G& new global minimum tax.
- US President Biden to meet with UK Prime Minister Johnson Thursday 10 June 2021.
- RBA Kent says expectations do not point to inflation rising above targets in a sustainable way
- US Senate votes to approve bill to help US compete with China.
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Hold onto your hats, folks! The Japanese yen took a nosedive after the Bank of Japan (BOJ) left its ultra-loose policy settings unchanged, including its closely watched yield curve control (YCC) policy. But wait, there's more! The BOJ also removed its forward guidance, which had previously pledged to keep interest rates at current or lower levels. So, what's the scoop? Market expectations had been subdued going into the meeting, but some were still hoping for tweaks to the forward guidance to prepare for an eventual exit from the bank's massive stimulus