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Markets Cheer BOJ Easing But US GDP Data May Cool Optimism

Markets Cheer BOJ Easing But US GDP Data May Cool Optimism

Ilya Spivak,

Talking Points:

  • Yen drops as Bank of Japan shocks markets with negative rate policy
  • Australian, NZ Dollars follow stocks higher on firming risk appetite
  • US Dollar may rise as sentiment sours if US GDP data outperforms

The Japanese Yen underperformed in overnight trade after the Bank of Japan unexpectedly introduced negative interest rates into its monetary policy framework. Policymakers adopted a three-tier system akin to that of Switzerland, Sweden and Denmark: a portion of deposits at the BOJ will earn interest of 0.1 percent, the next layer will earn 0.0 percent, and the final component will be subject to a rate of -0.1 percent.

The expansion of monetary stimulus helped boost risk appetite, sending the sentiment-linked Australian and New Zealand Dollars higher alongside Asian stock prices. S&P 500 futures registered a similar response and continue to point higher ahead of the opening bell on Wall Street, hinting that the upbeat mood is poised to carry through into the week-end.

The release of fourth-quarter US GDP figures threatens risk-on follow-through however. Output is seen growing at an annualized pace of 0.8 percent, a marked downtick from the 2.0 percent recorded in the three months through September 2015.

A soft print may pass with relatively little fanfare considering the already significant downgrade of Fed rate hike bets in recent weeks. An upside surprise that clashes with the priced-in status quo is likely to produce a more pronounced response, forcing portfolio readjustment that undermines risk appetite and boosts the US Dollar.

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Asia Session

GMTCCYEVENTACTEXPPREV
21:45NZDBuilding Permits (MoM) (DEC)2.3%-2.4%
23:30JPYJobless Rate (DEC)3.3%3.3%3.3%
23:30JPYJob-To-Applicant Ratio (DEC)1.271.261.25
23:30JPYOverall Household Spending (YoY) (DEC)-4.4%-2.5%-2.9%
23:30JPYNatl CPI (YoY) (DEC)0.2%0.2%0.3%
23:30JPYNatl CPI Ex Fresh Food (YoY) (DEC)0.1%0.1%0.1%
23:30JPYNatl CPI Ex Food, Energy (YoY) (DEC)0.8%0.9%0.9%
23:30JPYTokyo CPI (YoY) (JAN)-0.3%0.0%0.1%
23:30JPYTokyo CPI Ex-Fresh Food (YoY) (JAN)-0.1%0.1%0.1%
23:30JPYTokyo CPI Ex Food, Energy (YoY) (JAN)0.4%0.6%0.6%
23:50JPYIndustrial Production (MoM) (DEC P) -1.4%-0.3%-0.9%
23:50JPYIndustrial Production (YoY) (DEC P) -1.6%-0.6%1.7%
23:50JPYLoans & Discounts Corp (YoY) (DEC)2.6%-2.7%
00:01GBPLloyds Business Barometer (JAN)45-45
00:05GBPGfK Consumer Confidence (JAN)412
00:30AUDPPI (QoQ) (4Q)0.3%-0.9%
00:30AUDPPI (YoY) (4Q)1.9%-1.7%
00:30AUDPrivate Sector Credit (MoM) (DEC)0.5%0.6%0.4%
00:30AUDPrivate Sector Credit (YoY) (DEC)6.6%6.7%6.6%
02:00NZDMoney Supply M3 (YoY) (DEC)8.1%-8.4%
03:38JPYBOJ Annual Rise in Monetary Base¥80T¥80T¥80T
03:38JPYBOJ Basic Balance0.1%-
03:38JPYBOJ Macro Add-on Balance0.0%-
03:38JPYBOJ Policy-Rate Balance-0.1%--
04:00JPYVehicle Production (YoY) (DEC)-2.3%-6.1%
05:00JPYHousing Starts (YoY) (DEC)-1.3%0.5%1.7%
05:00JPYAnnualized Housing Starts (DEC)0.860M0.888M0.886M
05:00JPYConstruction Orders (YoY) (DEC)14.8%-5.7%

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
06:30CHFSNB 4Q 2015 Currency Allocation --Medium
06:30JPYBOJ’s Kuroda Gives Press Conference --High
06:30EURFrench GDP (QoQ) (4Q A) 0.2% (A)0.3%Low
06:30EURFrench GDP (YoY) (4Q A) 1.3% (A)1.1%Low
07:00EURGerman Retail Sales (MoM) (DEC)-0.2% (A)0.4%Low
07:00EURGerman Retail Sales (YoY) (DEC)1.5% (A)2.4%Low
08:00CHFKOF Leading Indicator (JAN)96.096.6Low
09:00EUREurozone M3 Money Supply (YoY) (DEC)5.2%5.1%Low
10:00EUREurozone CPI Estimate (YoY) (JAN)0.4%0.2%High
10:00EUREurozone CPI Core (YoY) (JAN A) 0.9%0.9%High

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.07301.08281.08841.09261.09821.10241.1122
GBP/USD1.39841.41591.42611.43341.44361.45091.4684

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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