Risk appetite wanes ahead of US Fed, BOJ meetings

Tuesday, October 27, 2015

The yen posted gains for a second session overnight against the USD as investors positioned themselves ahead of tomorrow’s FOMC rates decision and Friday’s BOJ meeting. Investors piled into the safe haven currency prompting it to trade towards 120.50 against the USD and posted solid gains against both the euro and pound sterling on speculation that the Bank of Japan would refrain from further stimulus and would keep the annual rise in the monetary base steady at 80tn yen. Appetite for risk assets was on the whole subdued overnight with benchmark indices across Asia paring yesterday’s gains with Chinese mainland indices among the few benchmarks to end the session in positive territory, albeit marginally above the open. With key meetings for both the US Fed and BOJ this week as well as US Q3 GDP and employment data investors will likely remain on the side-lines as they hold out for further insight from central bankers.

Gold prices offered further indication of the shift in risk appetite as prices snapped a four session bear run during the overnight session. After reaching a fresh three and a half month high above $1,191/oz earlier this month, spot prices have come under renewed pressure since then and slumped back towards $1,163/oz yesterday. Prices for the yellow metal have traded with significant volatility in recent sessions as investors struggle to interpret cautious signals from the world’s central bankers amid a backdrop of mixed economic data. Gold prices snapped the four session losing streak during the Asian session as prices found firm support around yesterday’s close and traded towards $1,166/oz early on, however, downward trend resistance seems relatively firm at this level and we could see prices struggle to lift materially.

The pound sterling managed to snap a four day bear run against the USD yesterday as the currency traded back above the 200 day MA, ending the session at 1.5352 but not before attempting to test resistance at the 50 day MA towards 1.5380. Activity this morning has seen sterling hold onto newly found support at the 200 day moving average but early attempts to push higher against the greenback have been limited. All eyes will be on this morning’s release of advanced Q3 GDP data with forecasters expecting the UK economy to have expanded by 0.6% q/q. With the Bank of England next set to meet on the 5th of November, the same date they will be releasing their latest inflation report, investors will be paying close attention to data points and comments made by BOE officials in the run up.

JPY strenghtens towards 120.50 against USD

JPY Curncy Japanese Yen Spot 2015 10 27 07 46 53

Gold prices snap bear run on reduced risk appetite

XAU Curncy Gold Spot Oz D 2015 10 27 08 04 43

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Topics: Gold, JPY, GBP
More from: Kash Kamal