BOJ Leaves Policy Unchanged

There have been 2 major announcements on the economic front in the morning as the RBA released the minutes of the meeting that was held in the first week of December and where they had decided to leave the rates on hold. The minutes said that the rising AUD could complicate the economic recovery. It also expressed concern over the labor market which has delayed its recovery and overall, it is concerned about the uncertainty surrounding the economy and the jobs market. This opens the door slightly for rate cut but with the next rate announcement in February only and with no clear indication of a cut yet from the RBA, it will be left to the data that will come along in January for the market to form an opinion on whether the economy is on the recovery path or not. If the data continues to come in bad, then we can safely expect a rate cut in the near future.

The other major announcement was the BOJ rates and policy decision and both of these have been maintained at status quo. The rates have not been changed and the policy has also been maintained with no changes with the BOJ continuing its policy of buying JGBs at the current pace. This piece of news caused weakness in the yen and with a press conference from Kuroda scheduled for a couple of hours later, we could see some more volatility in the yen related pairs during the course of the day.

Overnight, we had the unfortunate geopolitical events of the Russian Ambassador to Turkey being shot dead and several people in a Christmas market being killed in Berlin, though it is still not clear whether they are to be classified as terrorist events. We also had Yellen expressing happiness with the way the labor and wage market is growing in the US and this has helped to keep the dollar momentum going, which is expected to continue for the rest of the day.
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