Europe Summary and Highlights 19 December
JPY weakness was the man feature of the European morning.
European morning session
JPY weakness was the man feature of the European morning. USD/JPY gained more than a figure and a half, touching a high of 157.14, while the USD otherwise slipped a little lower, with EUR/USD gaining 20 pips to 1.0410, GBP/USD 40 pips to 1.2640, and AUD/USD 15 pips to 0.6245.
JPY losses were triggered by BoJ governor Ueda’s press conference, which was interpreted as dovish. His focus was on wage growth and whether it would continue to be strong enough to allow further rate hikes, indicating that the March wage round would be important but also saying a January rate hike could not be ruled out. USD/JPY’s gains were in any case consistent with the recent correlation between USD/JPY and the US/Japan 10 year yield spread.
Otherwise, the Riksbank and Norges Bank rate decisions were as expected, with the Riskbank cutting a further 25bps and Norges Bank leaving rates unchanged. EUR/NOK was not much changed, but EUR/SEK dropped 0.5% on the perception that the Riksbank were nearing the end of their easing cycle. Swedish 2 year yields were up 12bps on the session.
Asia session
As most anticipated, the BoJ has decided to keep rates on hold in their December meeting. There is little forward guidance in the statement which seems to suggest the BoJ is taking its time or the medium term terminal rate may not be 1% as market thinks. The BoJ also released their review of monetary policy from a broad perspective and it concluded that 2% target of price stability should remain and the bank should keep enough room for cut in case of need to stimulate the economic amid crisis. USD/JPY is trading 0.37% higher at 155.38 as U.S. Treasury yield rises and JGB yields sliding since session begins.
After touching a session low at 0.6199, the AUD/USD has staged a minor rebound along major currencies against the USD. There does not seem to be a major change of sentiment as we see regional equities followed overnight momentum move to the south. The U.S. equities are taking a breather for now to brace for the BoJ. AUD/USD is trading 0.04% higher at 0.6219, NZD/USD rose 0.13% to 0.563 while USD/CAD slipped 0.05% on barely higher oil. Else, EUR/USD is up 0.32% and GBP/USD up 0.14%.