Nikkei drags the JPY lower

The Nikkei is trading up close to 4% following an article published over the weekend in Japan that suggested the GPIF (and its $1.2 trillion pension fund) is looking to raise the allocation that it invests in domestic stocks to 25% from the current allocation of 12%. Prime Minister Shinzo Abe expressed that the GPIF should invest in riskier assets in search for higher yields that are currently not available in the domestic market, as the resource on the pension fund demands higher returns. The reform minded PM also revealed that he may delay further hikes in Japan’s consumption tax if it inflicted too much damage on the domestic economy, calling the suggestion ‘meaningless’.

The dollar trades with a slightly better bid tone as 10-year US treasury yields recover to trade at 2.22%, following last week’s equity-inspired sell off. The PBOC injected $33 billion into the three month loan vehicle, targeting national and regional lenders as the Central Bank look to take action against any global deflationary threat that could impact China.

The FX market and the dollar look to take their leads again from the equity markets following last week’s growth scare and stock meltdown. Concerns intensified on the global growth outlook as data releases disappointed and concerns grew of further Ebola outbreaks. The data calendar today is rather bleak as we look towards the latest central bank thinking, with the release of the RBA and BoE minutes along with CPI from the US. The EU gives us PMI data as the UK round off the week with fresh GDP estimate.

EUR/USD

Supports 1.2700-1.2675-1.2605  | Resistance 1.2800-1.2850-1.2890

USD/JPY

Supports 106.80-106.50-106.05 | Resistance 107.50-108.25-109.00

GBP/USD

Supports 1.6025-1.6000-1.5940 | Resistance 1.6125-1.6170-1.6225