Japans intervention in currency markets pushes US Dollar

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The big news out overnight is Japan’s intervention in the currency markets. Japan intervened pushing the US Dollar higher as they feel that the one sided strength of the Yen will be damaging to any long term recovery. Japan also hinted that it may intervene further down the line with the US Dollar likely to be the main beneficiary. The Dollar strengthened across the board and has continued to do so this morning. This coupled with the pressure that the Euro is under because of the debt crisis situation could now move to a reasonable decline in EUR/USD

The big news today is both the Bank of England and European Central Banks interest rate announcements. Both central banks are faced with high inflation and low growth prospects meaning they have to tread carefully at present. Due to recent poor data out the UK it is pretty much certain that there will be no change in policy at the moment and markets will have to wait until next week’s inflation report to see just how dovish the Bank of England’s current tone is.

The European Central Bank is also expected to leave rates on hold today and the biggest news will be the press conference afterwards. European Central President Jean Claude Trichet is bound to come under fire over the European debt crisis. It will be interesting to see how well he can fend off questions and put a positive spin on the Euros current situation, especially as sentiment is beginning to become more and more negative.

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