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Central bank policy driving markets

Four markets in focus today: EUR/USD, USD/JPY, Spot Gold and David Jones.

ECB
Source: Bloomberg

EUR/USD

The single currency barely flinched following the Portugal developments and continues to hold its ground at around 1.3600 against the greenback. Perhaps Mario Draghi’s speech later today as he testifies before the Committee on Economic and Monetary Affairs might bring some commentary on stimulus measures. We also have industrial production for the region which is expected to show a 0.3% improvement. These two events could cause some volatility for the pair.

USD/JPY

The pair has been under pressure in recent weeks and continues to test some key support levels as we commence this week’s trading. While the price action is bearish, some traders hesitate shorting the pair heading into the BoJ meeting. The BoJ has been quite happy to stay put on further stimulus but one has to wonder what the trigger for further stimulus will be. Recently it has looked as if the BoJ is not really concerned about the moves in the yen. Any change in statement by the BoJ could cause some volatility.

Spot Gold

After a big run last week, the precious metal continues to hold its ground around $1,340. There is plenty of activity this week on the US front and in emerging markets which could lead to some volatility for gold. Janet Yellen will be on the wires and if she reinforces her dovish tone, we could be in for further gold strength. Additionally head of states for key emerging nations including India, China, Brazil and South Africa will be at a Summit which could yield some comments that impact commodities. Buying gold on dips is likely to be the preferred strategy this week. 

David Jones

Shareholders are set to vote on the Woolworths South Africa takeover today with many tipping it’ll go through. This vote will also be key for Country Road which is also under offer from Woolworths. It’ll also be interesting to see how DJS’ largest shareholder Solomon Lew reacts to the outcome.

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