Bank of Japan’s new chief Kuroda delivered on the easing plans set by the government headed by PM Shinzo Abe. According to the Monetary Policy Statement, the Policy Board of BOJ agreed to introduce qualitative and quantitative easing and plans to double its holdings of Japanese government bonds and ETFs within two years. Kuroda said the BOJ may act more depending on the future economic developments. Further, he said the 2% inflation target is achievable and there is no concern for any asset bubble. BOJ Overnight Call Rate remained at less than 0.10 percent.
The European Central Bank and Bank of England also kept their respective rates unchanged on Thursday. The rates were held at 0.75 percent and 0.50 percent, respectively. Similarly, the BOE’s Asset Purchase Facility was maintained at GBP375 billion.
On Friday, the US jobs data disappointed the market with a surprisingly weak reading. Non-Farm Employment Change for March came in 88,000, much weaker than the 198,000 median expectations and the prior month’s 268,000. Labor participation rate also plunged to the weakest since 1979 at 63.3 percent. Unemployment rate eased to 7.6 percent.
Commodities
Gold sellers won this week as they were able to pressure price lower after the $1,600 level failed to hold. Price made a quick slide, reaching as low as $1,539 as buyers failed to halt the selling rampage. However, things changed on Friday when a weak US employment data sent Gold soaring back up and interrupted the week’s downmove. Gold closed the week at $1,580 and has a fair chance to reach above the $1,600 next week. The critical question is: how bullish are the buyers at this stage?
Oil reversed all of its previous week’s gains – and then some – this week after the climb above the $97 level proved unsustainable for eager bulls. Price reached toward the resistance area in the upper-$97s and this initiated a price tumble that precipitated all 5 trading days of this week. Oil plunged to $91.91 on Friday before price snapped back up to close the week at $93. Price is likely to enter into consolidation or create a follow-on downmove of buyers won’t step in to bring price back higher from here.
Currencies
EURUSD has finally shown signs of life after it made a significant reversal from the 1.2740s this week. ECB kept rates unchanged on Thursday. The weak US jobs data on Friday helped put more wind in EURUSD’s sail as the pair climbed back above the 1.3000 level. The pair reached a 1.5-week high of 1.3038 before it closed the week at 1.2988. Barring poor momentum and Eurozone developments, the pair is on track to move higher and back to the 1.3500s.
USDJPY had a spectacular week as the BOJ and its new chief Kuroda delivered well in his first-ever press conference. The pair rocketed 500-pips higher in just two days and it seems it could continue on for some time. Buyers should now guard the 95-96 area to maintain the current momentum.
GBPUSD, like EURUSD, was sent higher on Thursday and Friday after the week’s developments. The Bank of England also kept the rates and its Asset Purchase Facility unchanged and the pair sprung higher by 320 pips. The climb easily pierced through the key resistance at 1.5300 level and this give buyers a better chance at higher prices. 1.500 stands in the way ahead of 1.57-1.58.
The Week Ahead
On Monday, the market will witness the release of economic data such as Japan’s Economy Watchers Sentiment and Current Account, Australia’s ANZ Job Advertisements, Euro-area Sentix Investor Confidence, Germany’s Industrial Production, and Bank of Canada Business Outlook Survey.
On Tuesday, there are reports including NZIER Business Confidence, UK’s BRC Retail Sales Monitor and RICS House Price Balance, Japan’s Monetary Policy Meeting Minutes, China’s PPI and CPI, Germany’s Trade Balance, Switzerland’s Retail Sales, UK’s Trade Balance and Manufacturing Production, and Canada’s Housing Starts and Building Permits.
Wednesday will be slightly quieter this week with only a few key releases such as Australia’s Westpac Consumer Sentiment, China’s Trade Balance, Italy and Eurozone Industrial Production, and FOMC Meeting Minutes.
On Thursday, there are New Zealand’s Business NZ Manufacturing Index, Japan’s Core Machinery Orders, Australia’s Employment data, ECB Monthly Bulletin, and US Unemployment Claims. FOMC’s Bullard and UK MPC’s Tucker will also be expected to give speeches.
Finally on Friday, there news releases such as Japan’s Tertiary Industry Activity, Germany’s WPI, Euro-area Industrial Production, and US PPI, Retail Sales, and preliminary University of Michigan Consumer Sentiment. Eurogroup meetings and ECOFIN meetings will also take place. Moreover, speeches may be delivered by US Federal Reserve’s Rosengren and Bernanke.
