BOJ and PBoC keep rates unchanged, dollar on the backfoot

Source: 123RF.

The BOJ said it expected inflation to rise further and for the economy to grow steadily, opening the way for rates to rise fairly soon.

The People's Bank of China also kept rates unchanged despite the ailing economy. Better-than-expected US jobless claims data and a strong Philadelphia Fed manufacturing index number initially saw the dollar firm late yesterday before closing weaker on the day as traders continued to weigh the impact of the Fed's 50bps rate cut.

The DXY index is currently sitting at 100.55, with the euro and pound trading at 1.1163 and 1.3293, respectively, while the yen is at 142.30. The pound rallied yesterday after the Bank of England kept its interest unchanged.

Wall Street rallied sharply yesterday but the futures have opened in the red this morning. The rand traded firmer before the Sarb's MPC decision yesterday, touching R17.39 at one point, but we saw some profit-taking in the wake of the MPC's 25bps rate cut, with the local currency eventually closing at R17.50.

Markets are forecasting a further three 25bps cuts by the Sarb over the next three MPC meetings. The rand is likely to remain within a R17.40/R17.70 range in the short term as it tracks international moves but we could see further profit-taking, given the rand's recent strong run.

Gold eyeing a break of the $2,600 level

Gold, which hit a fresh all-time high of $2,599.92 yesterday on the back of the 50bps rate cut by the Fed, looks likely to strengthen further as markets price in further cuts.

Platinum and Palladium are also holding on to recent gains, while Copper and Nickel continue to recoup recent losses. Brent crude is trading at $74.63 this morning, slightly down from last night's $74.88 close.

The US rate cut and lower global inventories are giving some support to Brent, but Chinese demand concerns should limit gains.