Dollar extends this week's strong rally as markets' focus is back on contagion risks of European debt crisis. Italian Prime Minister designate Monti, will unveil his cabinet today but markets seem to be quite unconvinced of his appointment so far. There are still concerns on how Monti could overcome the debt and fiscal problems. Italian 10-year yield broke above the unsustainable 7% yesterday while 5-year CDS made new high above 600bps. The worry on contagion also pushed German bund spread with Spain, Belgium, Austria and even France to new euro era records. Main focus will now turn to Spain and France bond auctions. Spain is scheduled to auction EUR 4b of 2022 bonds today while France will sell notes maturing 2013 to 2016 tomorrow.
Technically, dollar index's break of 78.16 resistance confirmed resumption of recent rise from 78.16 and the index would now move towards 80 psychological level in near term. Similar picture is seen in EUR/USD where break of 1.3483 support confirms near term fall resumption and should pave the way to 1.3145 low next. EUR/JPY's fall also accelerates to as low as 103.45 so far. AUD and CAD also edged lower against dollar but momentum is weak so far. Markets' focus main focus more on selling of European majors against dollar and yen.
Talking about yen, BoJ left rates unchanged at 0-0.1% today as expected. The asset buying size was also left unchanged at JPY 20T. The bank downgraded the economic assessment noting that economic activity has picked up "at a more moderate pace" because of slowdown in overseas economies. The bank warned that European debt crisis could result in weaker growth in the "global economy, particularly through its effects on global financial markets". And, Japan is facing "adverse effect" from global slowdown, yen strength and Thailand's flood. Meanwhile, the expects that Japan won't get out of deflation before end of fiscal 2013.
Looking ahead, UK job data and Eurozone inflation will be released in European session. But main focus will be on BoE inflation report. From US, CPI, TIC capital flow, industrial production and NAHB housing market index will be featured.
Technically, dollar index's break of 78.16 resistance confirmed resumption of recent rise from 78.16 and the index would now move towards 80 psychological level in near term. Similar picture is seen in EUR/USD where break of 1.3483 support confirms near term fall resumption and should pave the way to 1.3145 low next. EUR/JPY's fall also accelerates to as low as 103.45 so far. AUD and CAD also edged lower against dollar but momentum is weak so far. Markets' focus main focus more on selling of European majors against dollar and yen.
Talking about yen, BoJ left rates unchanged at 0-0.1% today as expected. The asset buying size was also left unchanged at JPY 20T. The bank downgraded the economic assessment noting that economic activity has picked up "at a more moderate pace" because of slowdown in overseas economies. The bank warned that European debt crisis could result in weaker growth in the "global economy, particularly through its effects on global financial markets". And, Japan is facing "adverse effect" from global slowdown, yen strength and Thailand's flood. Meanwhile, the expects that Japan won't get out of deflation before end of fiscal 2013.
Looking ahead, UK job data and Eurozone inflation will be released in European session. But main focus will be on BoE inflation report. From US, CPI, TIC capital flow, industrial production and NAHB housing market index will be featured.