Talking Points:
- The US Dollar remained under severe pressure despite this week’s Bank of Japan assertions that stimulus is here to stay
- Japanese data came in strongly overall
- Stock markets were more subdued after Tuesday’s gains
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The US Dollar remained on the defensive Wednesday despite the re-opening of the Federal Government earlier this week. It hit a four-month low against the Japanese Yen thanks to enduring concerns that central banks other than the Federal Reserve will in due course start to unwind their own post-crisis stimulus.
There was no particular news to support this view, especially in the cast of Japan. Indeed, Bank of Japan Governor Haruhiko Kuroda spent some time Tuesday confirming that current, ultra-loose policy settings will remain in place. Some market watchers speculated that US tariffs on solar panels and washing machines were a more obvious challenge to Dollar bulls, as the US currency has in the past struggled when Washington imposes such duties.
Asia Pacific stock markets were mixed, following a day of strong gains Tuesday as traders applauded the end of government shutdown in the US. The Nikkei 225 ended down by 0.8%, despite some strong economic news from Japan- both Japanese trade and the manufacturing sector seem to be doing nicely. The Kospi retreated a little too, but stocks in China and Australia girded themselves for modest gains.
Gold prices were firmer on that weaker US Dollar while crude oil prices were steady. Elevated US stock levels were reportedly weighing on the market but supply cuts elsewhere leave the overall backdrop quite supportive.
Still beckoning investors on Wednesday’s data docket are various Purchasing Managers Index numbers for January from around Europe and official UK labor-market numbers. There are plentiful US economic numbers too. Manufacturing and service-sector PMIs are coming as is information on existing home sales, mortgage applications and gasoline inventories.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
