Strong gains in the U.S. equity markets helped rally the USD JPY throughout the early part of the morning. Once it looked as if equity markets were going to post an intraday high, risk adverse traders started to buy the Japanese Yen.
Strong gains in the U.S. equity markets helped rally the USD JPY throughout the early part of the morning. Once it looked as if equity markets were going to post an intraday high, risk adverse traders started to buy the Japanese Yen. Continue to look for this two-sided trade throughout the rest of the trading session until equity markets decide to pick a direction.
Traders are also flocking to the long side in the EUR USD, AUD USD and NZD USD in search of higher yielding assets.
There was some talk yesterday that the implementation of a Fed exit strategy would mean an end to the free flow of money that has been finding its way to Australia and New Zealand, but upon further review, it looks as if the Fed is a long way from beginning its exit strategy.
For the second day in a row, the British Pound experienced downside pressure overnight that spread into the New York session. Today’s early weakness was triggered by the release of the minutes from the Bank of England’s July 8-9 Monetary Policy Committee meeting. This report showed members voted 9-0 to leave the bank’s asset purchase program unchanged at 125 billion pounds ($205 billion).
Traders pressured the British Pound because they were uncertain as to whether the BoE would continue its asset buyback program. If they did then this would send a signal to traders that the economy is still weakening.
The reversal to the upside in September Crude Oil and the relentless buying in the U.S. equity markets is helping to put downside pressure on the USD CAD. Yesterday the Bank of Canada decided to leave interest rates unchanged and did not make a strong statement against the rise in the Canadian Dollar.