For those not totally distracted by the Royal marriage, was the FOMC meeting and the first ever Bernanke press conference last night. A dovish tone of the statement and the signals of the Governor of the Fed policy will remain loose for a some time again even if of2 end on schedule in June caused another dive in the dollar. The gravity defying the decline of the dollar this week suggests that low 71.80 registration in the dollar index (the greenback compared to its major trading partners) may be in danger of insurance.
At this point there is nothing much to support the dollar. The Fed is not helping, Q1 GDP should be quite dull, when it came out later today and the financial situation seems to have focused minds is not the time for a rebound in the dollar. Although we believe there will be further weakness in the buck, EURUSD l and AUDUSD above 1.10 can report some profit taking by investors and could lend some temporary respite for the dollar.
In the credit market, the 2-year Treasury yields fell while more long term Treasury gives roses. The emphasis of the curve of the's 10 - 2 suggests two things: 1, weakness of the dollar in the short term 2 of the application of hedges of inflation as the precious metals will persist. As les gets market worried about the long-term inflation Outlook, of constantly lose monetary policy in investors us are dumping of the longer dated Treasury bills. It can also have a negative effect on the dollar, but only if we see dumping large scale securities which we have not yet seen.
While the weakness of the dollar is good news for the US economy, it spells bad news elsewhere, namely the euro area. EURUSD jumped to more than 1.5 per cent since yesterday and l is the nearest target. It runs in some resistance to 1.4850, but hawkish comments this morning by Member of ECB Mersch, who said that the ECB will continue to "progressive output at an appropriate pace" and that the policy has been set for the region in its whole and not for individual membershighlights the differences between the Fed and the ECB and should keep the pressure on the rise on the single currency.
AUDUSD is now the carry trade of choice, relations AUDJPY. Since the beginning of April the Aussie is 2.5% against the yen, although it is more than 5% against the dollar. As mentioned above, Ben Bernanke the Fed did a let many obstacles in the way for AUDUSD reach 1.10 in the immediate future. The pair was also high at 1.0940 today trades. According to GDP data today later output we see 1.10 quickly enough.
The yen continues to gain pace against the dollar and wobbles about 81.50, a good area of support. The meeting of the Bank of the Japan today concluded before the Golden Week holidays. The Bank of the Japan left the rate unchanged target at 0.1% as planned and did not restart its economic stimulus plan. A raft of economic data was also published, the first economic signals after the earthquake. She made for dark reading. Inflation remains negative across the country and overall household spending fell 8.5% on a basis annualised suggesting that the confidence of consumers nose-dived after the earthquake on March 11.
The semi-annual Outlook for Bank of Japan are also released after the meeting of the Bank of Japan. It was less dovish that some may have expected. He noted the extreme uncertainty of these perspectives, but its central scenario was that the constraints caused by the earthquake offer interfere with growth for the next two quarters because of the pressure weighing on the side of production (industrial production in fact dropped from 15%.3 in marspire that 10.6% expected.) However, the fall, it provides that some of these constraints to facilitate earthquake and the reconstruction effort could really stimulate growth.
Outlook has also noted that pricing pressures could increase in the short-term, but long-term price expectations in the household sector remained stable at approximately 1%. But the Outlook for the yen remains volatile. We believe that below 81.00 in USDJPY risk intervention returned in game. For now the yen is still maintains well enough and this report is unlikely to change this.
Moreover, the RBNZ was relatively dovish of the overnight and said that rates would remain at their current level for some time. This stimulated the AUDNZD. Now come the markets will look for us Q1GDP. The market expects annualised GDP decrease of 3.1% in quarter of 2010 to 2% in early 2011. The risks are decreasing but that consumption, most of us growth, has been extremely low in part because of the rising prices of raw materials. Initial jobless claims are also released and are expected to have dropped the week 395 k versus 403 k last.
The risk remains on and stocks have had a good start for the last day of the prior work UK week of wedding tomorrow.