Central bank announcements spark volatility across wise money markets

After a barren spell over the last week, an avalanche of data and announcements from central banks across the developed world hit the markets.
Central bank announcements spark volatility across wise money markets
The resulting volatility overnight in Asia and into this morning’s European session stand in stark contrast to the goldilocks conditions we’ve been experiencing for the last few months.

Firstly the Bank of Japan suggested Yen depreciation had gone far enough for the moment, sparking JPY appreciation in the major pairs. Whether the BoJ can control the pace of the Yen movements will be tested to the maximum by the market, and lies at the very heart of whether Abenomics can ultimately be successful.

Today marks the first real test of the economic plan.

The Fed minutes, released yesterday evening, showed the central bank considering slowing the pace of asset purchases “in the next few meetings” but only if the employment situation improved significantly.

The wording was broadly expected by the market, with the Dollar slowly gaining against Sterling and the euro, but the timing definitely was not. Along with a soft Chinese PMI data this morning risk is definitely off the table, with the Nikkei down over 7 per cent overnight and European bourses posting large declines in early trading.

UK data also disappointed, with retail sales lower than expected and the IMF also calling for a readjustment to fiscal policy away from immediate austerity towards higher infrastructure investment.

Today look set to be very volatile, so the lack of more big ticket data today is probably a good thing. Of note is Euro zone PMI this morning and intial jobless claims from the US later this afternoon.

Leave a Reply