Yen crumbles as Abe calls for sub-zero interest rates

<p>The most notable mover overnight was EUR/JPY, following the latest news in the Japanese election saga. The cross rallied from 102.14 to 103.19 following news […]</p>

The most notable mover overnight was EUR/JPY, following the latest news in the Japanese election saga. The cross rallied from 102.14 to 103.19 following news the Liberal Democrat leader Shinzo Abe has called for unlimited easing by the Bank of Japan. In a speech yesterday, Abe advised that if he was successful in his campaign, he would call for the BoJ to revise the inflation target from 1% to 3% and cut benchmark interest rates to zero, if not lower. USD/JPY reached a seven-month high of 80.93, the highest level since 26th April 2012.

FOMC minutes published last night revealed the Fed may replace Operation Twist (set to expire by the end of December) with conventional quantitative easing. The recent re-election of President Obama has significantly increased the chances of Fed boss Bernanke defending his post till early 2014. Although the minutes did assign a significant amount of detail linking Fed policy to unemployment targets, overall there was nothing groundbreaking or particularly positive to report. The euro temporarily bounced on the minutes release, before moving lower and printing an overnight low of 1.2715 against the dollar.

A jam-packed day on the data front today, kicking off with slightly stronger French and German preliminary GDP. At 9am we have the ECB monthly bulletin, followed by UK retail sales at 9.30am – forecasted at -0.1%. At 10am eurozone CPI data is released, with US CPI at 1.30pm. The focus, however, will be on US unemployment claims also at 1.30pm and Philly Fed manufacturing figures at 3pm.

 


EUR/USD

Supports 1.2690| Resistance 1.2825


USD/JPY

Supports 79.80 | Resistance 81.40


GBP/USD

Supports 1.5825 | Resistance 1.5912

 

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