Article / 16 June 2016 at 8:57 GMT

From the Floor: Yen soars, dollar slides, stocks collapse

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  • For JPY there's a feeling that some intervention is coming – Hardy
  • Dovish Fed sends greenback reeling as yen hits 22-month high
  • BoE will leave rates steady and seek to reassure market on Brexit – Hardy
  • We've got an almost perfect set up for gold at the moment – Hansen
By Clare MacCarthy

Thursday finds global financial markets battling turbulent waters after a dovish Federal Reserve statement last night sent the dollar sharply lower against the yen which itself is benefitting from Brexit-inspired risk aversion and the Bank of Japan's decision overnight to hold monetary policy unchanged.

This brought the Japanese currency to a 22-month high, arousing suspicion that the Bank of Japan might step in to halt the climb which is damaging Japanese stocks and exports.

USDJPY yen soars to 22-month high:

Source: Bloomberg

"The Bank of Japan took a pass on policy change this time but there's a feeling that some intervention is coming I would suggest down towards 100 [vs USD] if not before then," says John J Hardy, head of FX strategy at Saxo Bank.

As to the Fed, Hardy notes that last night's statement contained some minor adjustments to the policy language but that the most important point was revisions to the committee members' funds rate projections. The median value of rate expectations for 2017 was reduced to 1.6 from 1.9 last March (chart below). "They're pricing in one hike this year and this is more in line with the market's expectations", Hardy notes.

As to the third major central bank meeting inside 24 hours, Hardy expects that the Bank of England's governor Mark Carney will follow his US and Japanese colleagues example and leave rates untouched while issuing reassuring words about steadying the market should British voters decide to opt out of the European Union next week


Source: US Federal Reserve

Meanwhile, as has become the norm in these turbulent days, gold is on a roll, having hit its highest price since 2014, says Ole Hansen, head of commodity strategy at Saxo. "We've still got the Brexit vote to come so there's plenty of uncertainty to support the market over the coming week. In addition to this you've got the yen surge, dovish Fed, falling bond yields and weak stocks, meaning that there's almost a perfect set up for gold at this stage," he says.

Spot gold – the only way seems upwards


Source: Bloomberg

Finally, despite today's dollar weakness, WTI crude oil has retraced half of the May supply disruption rally gains.  Risk-off sentiment is triggering the reduction of elevated bullish bets. Key support on CLN6 is now at $46.30/barrel followed by $45/b.

Red Sea

Red Sea. European stocks seconds after today's opening bell. Image: CNBC screen grab

– Clare MacCarthy is deputy editor at Saxo Bank

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.


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