Yen plunges, European Rates on hold
The Japanese Yen plunged in overnight trading, down by as much as 2.6% against major currencies as the new Governor Kuroda threw out many of the existing policies to create a far looser monetary framework.
European Central Bank President Mario Draghi is likely to keep interest rates unchanged today. Draghi is also likely to be questioned on the ECB’s role in Cyprus’s bailout. It is said that the ECB has provided less support to the economy than the United States or Britain, who have launched extensive asset purchase programmes and cut rates closer to zero. Their main concern is that its low rates are not reaching areas in the euro zone border, mainly because banks’ funding costs in crisis-affected countries are higher than those in the main countries, pushing loan costs up.
Meanwhile, the Bank of England concludes its policy meeting at noon, where it is reported that it will hold its key rate at a record low of 0.5%. Also, today the U.K.’s services sector published its highest expansion in seven months. Business confidence also rose to the highest since May, with nearly half of respondents forecasting growth in services.
On the FX Markets, the release of worse than expected macroeconomic data had little impact on the overall price action on Wednesday and instead the pair trended higher on the back of touted short squeeze and repositioning ahead of the MPC meeting announcement on Thursday. The price pattern remains in a bearish channel and near term support level is seen at 1.5091, the March 27th low, followed by 1.4832, the March 12th low.