As expected, it was a relatively quiet day across the currencies yesterday with the main talking point coming on the open with the gap in the Euro after positive news out of Germany, it took a few hours, but we did see the gap filled in and normal service resume across the board with the dollar on the back foot in muted ranges. Cable came a whisker away from hitting the key psych level of 1.4000 but looks poised to take that out at some point today, we’re now sitting at levels not seen since the Brexit vote. Aussie is back around 0.8000 and traders are watching this pair closely as it’s failed to break above here conclusively for the last 3 years, so any decent extension could see us into new ranges.
The good news is that the event risk picks up significantly as we move through the week and we should see volatility on the back of it, first up today is the BOJ and traders will be paying more attention to this meeting as expectation increases for less dovish rhetoric for Governor Kuroda. There is certainly no expectation of any movement in rates but after the very slight move we’ve seen to normalisation with the bank reducing its bond buying, we will be looking for any further forward guidance on this and how strong the BOJ’s growth forecast are.
Later on in the day, we have German and Euro ZEW data which could add some volatility to the single currency and it’s crosses as well as the ongoing WEF Annual meetings in Davos, however, it’s once again thin on the ground in terms of fundamental releases in the New York session and traders will begin to focus on the next central bank up on the rank – the ECB on Thursday.
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