Euro Recovers Risk-On Ahead of ECB, USDJPY Close to New Highs - 7.3.2013

The Bank of Japan unanimously voted to maintain its monetary policy unchanged with the overnight call rate remaining at 0-0.1% and the asset purchases at ¥76 tln. That was Shirakawa’s last meeting while a member of the board, Sayuri Shirai, proposed to start earlier the open-ended JGB purchases, but the rest of the board declined. The USDJPY jumped to 94.22 slightly below almost 3-year peaks at 94.29. The US dollar was strong after yesterday releases, ADP Employment report indicated private sector added 192K jobs in February, greater than anticipated 172K jobs , also the US factory orders declined by 2.0% in January, less than projected at minus 2.2%. The latter pushed the EURUSD below 1.30, however early today the EURUSD lifted, trading now at 1.3028 most likely due to Portugal’s credit rating raise to BB with stable outlook from negative by S&P. Additionally the Euro gained power on risk appetite accumulation ahead of the ECB meeting also due to lower yields than previously on 10 year bond auctions by Spanish and French government. Monetary policy is expected to remain unchanged but some dovish tone is expected at the press conference for further easing in the future. The Bank of Canada yesterday maintained its target for the overnight rate at 1% as it was expected, stating that “… monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required...”. The greenback against the loonie rose to its highest point since July 2012 at 1.0336 as tighter policy would not come as soon as expected with low inflation and growth in GDP. Lastly, the cable sank to more than 2 ½-year new lows at 1.4967 ahead of BOE monetary statement.