Will the Bank of Japan Intervene in the Japanese Yen? (page 2 of 2)

In fact, he stressed that because of the significant market turbulences, it is even more important for them to anchor inflation expectations to avoid "additional volatility." Eurozone economic data also helped the currency rally. The monthly rise in Industrial orders doubled expectations and even though service sector activity slowed, growth in the manufacturing and composite PMI accelerated in the month of January. The German IFO report is due for release tomorrow. The global economic turmoil should lead to a more cautionary outlook by German businesses. Meanwhile the Swiss franc continues to rally against everything in sight as risk gets taken off the table.

Reserve Bank of New Zealand Leaves Rates Unchanged at 8.25 Percent

Unlike the Federal Reserve and the Bank of Canada, the Reserve Bank of New Zealand left interest rates unchanged at 8.25 and issued a relatively hawkish statement. Even though Bollard said that the uncertainty for interest rates has increased, inflation pressures remain persistent and the economy is expected to grow reasonably well. Stronger than expected consumer prices in Australia should also help to extend the currency's gains. The Canadian dollar on the other hand is up for no reason other than a broad recovery in commodity currencies. Leading indicators dropped 0.1 percent last month, the first decline since 2001.

British Pound: February Rate Cut Not Forgone Conclusion

Despite stronger GDP growth in the fourth quarter and relatively hawkish minutes from the latest BoE rate decision, the British pound underperformed all of the major currencies. The GBP/USD, GBP/JPY, GBP/CHF and GBP/AUD all ended the US trading session lower while the Euro ended the day stronger against the pound. To the surprise of the markets, the BoE members voted 8 to 1 to leave rates unchanged at the beginning of the month. If the vote was tighter, then a February rate cut would be a near guarantee given the recent turmoil in the financial markets. Unfortunately the tightness of the vote means that the February rate cut is not a forgone conclusion. Therefore the combination of the stronger data and the hawkish minutes could lead to a further rally in the British pound.