Japanese Yen catapults in thin trading (page 2 of 2)

Even though the Bank of England believes that this is only a cyclical slowdown, it still leans them closer to another rate cut.

As we learned earlier this week, the latest decision to keep interest rates unchanged was an 8 to 1 vote, with the one dissenting member voting in favor of another cut. Of the major central banks that we follow, the BoE continues to remain the only central bank to be reducing interest rates.

This sheer difference between them and the 3 other major central banks (Fed, ECB and BoJ) that have already raised interest rates or are prepared to do so, will keep a bearish tone in British Pound for the beginning of the year.

Japanese Yen

With the Japanese markets closed for the Emperor's holiday, the US dollar and Euro resumed their sell-off against the Japanese Yen. The markets are extremely thin in the two currency pairs, exacerbating every move.

Even though these same trading conditions are expected to extend into the week ahead, Japan does have a number of important economic data slated for release. On Christmas Day, the Ministry of Finance will be releasing its business outlook survey.

We expect the MoF to echo the bullish sentiments already expressed by the Bank of Japan and the Japanese government. Consumer prices are also scheduled for release.

As the BoJ's favored inflation indicator, a further negative reading will stifle any residual expectations for an early rate hike. Labor market data, personal income, industrial production and retail sales should all shed more light on the health of the Japanese economy. For the most part, recovery is continuing but whether it is significant enough to tempt the Japanese government to join the BoJ in calling for an end to the country's zero interest rate policy still remains to be seen.