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    Yen rout continues as policy-makers express concerns over inflation

    JPY

    The yen lost further ground on Wednesday, falling some 70 points versus the dollar, and trading at 123.83 per dollar late in the New York session.

    The BOJ minutes of the 30th April meeting were released today. Policy makers believe that private consumption will remain resilient as incomes are increasing, although they expressed concerns about Japan’s inflation. Board members said that risks to consumer prices are tilted to the downside amid uncertainty about long-term inflation expectations, consumer spending as well as the output gap. If consumer prices slide to zero, it would affect inflation expectations.

    The BOJ pushed back the timeline for achieving the inflation target to fiscal year 2016 – even so a few members remained sceptical about the new time-frame saying that consumer prices would not reach the price goal until fiscal year 2017, the minutes showed.

    In addition, the central bank’s decision makers agreed that the risks to Japan’s growth are balanced, but they warned that growth could slow temporarily due to a nationwide sales tax hike in the beginning of fiscal year 2017.

    Official data showed the Japanese economy expanded an annualised 2.4% in the first quarter, better- than-expected, and following the 1.5% annualised growth in the final quarter of 2014.

    USD

    The dollar traded mixed on Wednesday, ending the day virtually unchanged at 1 basis point higher against a basket of currencies, at the time of writing.

    There was little data out to move markets, with MBA Mortgage Applications in week-ending May 22 the only release, and since it showed only a slight slide of a point to -1.6% from -1.5% in the previous week failed to impact on the greenback.

    Commentary from voting member of the Fed Jeffrey Lacker continued to say that June could be a good time for a ‘lift-off’ but that he personally had not made up his mind on the matter. If anything he saw a risk of hiking too late. Lacker also thought weak Q1 growth was probably transitory. The comments did not reflect a change in stance, however.

    The dollar gained underpinning support from recent strong data which showed robustness in the property sector and strong broad durable goods orders, as well as more and more Fed members saying a 2015 rate hike was now very likely.

    EUR

    News impacting on the euro on Wednesday consisted mainly of reports about the progress of Greek -creditor negotiations.

    Athens needs to agree a bailout deal with the E.U, IMF and the ECB before the end of June in order to meet all its debt obligations. The Tsipras administration, however, is unwilling to back down on many key election pledges it made which conflict with economic reforms and austerity policies demanded by creditors.

    For a while the euro rebounded on Wednesday after reports an agreement had been reached and a draft proposal was being drawn up, but these rumours were dismissed by E.U officials. Nevertheless members of the Greek negotiating team seemed upbeat, with Euclid Tsaklotas, chief economic s spokesman, saying that they had now gone even further and were discussing future aid packages for the country.

    Traders should stay alert for the possibility of a breakthrough in coming days, as rumours of a deal now appear to be emerging more frequently, and as the saying goes – “there is no smoke without fire.” Obviously this would lead to knee-jerk higher in the euro.

    On the data front there was only one piece of hard news, with Gfk Consumer Confidence in Germany showing a higher-than-expected rise to 10.2 in June.

    GBP

    The pound traded mixed on Wednesday as a lack of market moving news from the U.K meant the currency was more influenced by data impacting on counterparts than its own drivers.

    Sterling traders were also busy preparing for Thursday’s (tomorrow’s) first quarter GDP second estimate, which could cause volatility if it differs from the the first estimate of 0.3%.

    Current forecasts favour either a no-change result or an upside surprise, given the strong recent retail sales and construction data. However, a downside shock could be devastating for pound bulls as it would start to confirm fears of a significant slow-down occurring in the economy, after the initial estimate fell well below expectations and inflation figures showed deflation in April for the first time since 1960.

    Therefore there is much for traders to play for in tomorrow’s data, which is scheduled for release at 9.30am London time.

    JPY

    The yen lost further ground on Wednesday, falling some 70 points versus the dollar, and trading at 123.83 per dollar late in the New York session.

    The BOJ minutes of the 30th April meeting were released today. Policy makers believe that private consumption will remain resilient as incomes are increasing, although they expressed concerns about Japan’s inflation. Board members said that risks to consumer prices are tilted to the downside amid uncertainty about long-term inflation expectations, consumer spending as well as the output gap. If consumer prices slide to zero, it would affect inflation expectations.

    The BOJ pushed back the timeline for achieving the inflation target to fiscal year 2016 – even so a few members remained sceptical about the new time-frame saying that consumer prices would not reach the price goal until fiscal year 2017, the minutes showed.

    In addition, the central bank’s decision makers agreed that the risks to Japan’s growth are balanced, but they warned that growth could slow temporarily due to a nationwide sales tax hike in the beginning of fiscal year 2017.

    Official data showed the Japanese economy expanded an annualised 2.4% in the first quarter, better- than-expected, and following the 1.5% annualised growth in the final quarter of 2014.

    USD

    The dollar traded mixed on Wednesday, ending the day virtually unchanged at 1 basis point higher against a basket of currencies, at the time of writing.

    There was little data out to move markets, with MBA Mortgage Applications in week-ending May 22 the only release, and since it showed only a slight slide of a point to -1.6% from -1.5% in the previous week failed to impact on the greenback.

    Commentary from voting member of the Fed Jeffrey Lacker continued to say that June could be a good time for a ‘lift-off’ but that he personally had not made up his mind on the matter. If anything he saw a risk of hiking too late. Lacker also thought weak Q1 growth was probably transitory. The comments did not reflect a change in stance, however.

    The dollar gained underpinning support from recent strong data which showed robustness in the property sector and strong broad durable goods orders, as well as more and more Fed members saying a 2015 rate hike was now very likely.

    EUR

    News impacting on the euro on Wednesday consisted mainly of reports about the progress of Greek -creditor negotiations.

    Athens needs to agree a bailout deal with the E.U, IMF and the ECB before the end of June in order to meet all its debt obligations. The Tsipras administration, however, is unwilling to back down on many key election pledges it made which conflict with economic reforms and austerity policies demanded by creditors.

    For a while the euro rebounded on Wednesday after reports an agreement had been reached and a draft proposal was being drawn up, but these rumours were dismissed by E.U officials. Nevertheless members of the Greek negotiating team seemed upbeat, with Euclid Tsaklotas, chief economic s spokesman, saying that they had now gone even further and were discussing future aid packages for the country.

    Traders should stay alert for the possibility of a breakthrough in coming days, as rumours of a deal now appear to be emerging more frequently, and as the saying goes – “there is no smoke without fire.” Obviously this would lead to knee-jerk higher in the euro.

    On the data front there was only one piece of hard news, with Gfk Consumer Confidence in Germany showing a higher-than-expected rise to 10.2 in June.

    GBP

    The pound traded mixed on Wednesday as a lack of market moving news from the U.K meant the currency was more influenced by data impacting on counterparts than its own drivers.

    Sterling traders were also busy preparing for Thursday’s (tomorrow’s) first quarter GDP second estimate, which could cause volatility if it differs from the the first estimate of 0.3%.

    Current forecasts favour either a no-change result or an upside surprise, given the strong recent retail sales and construction data. However, a downside shock could be devastating for pound bulls as it would start to confirm fears of a significant slow-down occurring in the economy, after the initial estimate fell well below expectations and inflation figures showed deflation in April for the first time since 1960.

    Therefore there is much for traders to play for in tomorrow’s data, which is scheduled for release at 9.30am London time.


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