Rates Day

Today we go through the monthly routine of a rate announcement, this time its the turn of the European Central Bank. The rate announcement in my opinion will be a non event, as I believe their is zero chance of a rate rise and the book rate should stay at 1%.

What may hold my interest if I can stay awake is the speech that always follows 45 Min's after the announcement. The sentiment at this announcement is always keenly followed by traders for clues to when and if the loose monetary policy which has been a feature of the European Central Bank for a while now will be reviewed/and or tightened.

I personally don't believe that the last press conference of the year will deliver anything earth shattering and would be surprised if we were to see excessive moves in Euro as a result given that most of the professional money is in the process of shutting down their trading operations for the year. Mr Trichett has been known to surprise in the past so you never know and as always keep the stops in place.

The other interesting thing I am currently watching is the markets reaction to the extra funding provided to the Japan economy, this I believe has been universally seen as a positive by traders in both the equity and forex markets. This will continue to pressure the yen and selling should keep accelerating for now, all the yen crosses have seen substantial gains this week.

Markets tend to like decisive action from reserve banks and the Bank of Japan have acted decisively this week even in the face of criticism from parts of the Japanese government. The risk for deflation is real and whilst they don't want to become a large holder of US Dollars, short term I believe the BOJ see's this as a necessary measure to help protect their economy.

As Forex traders this really only means one thing and that's a weaker yen, decisive action is very helpful in the forex market as the move tends to be up or down, not sideways or anything else makes it much easier to trade and profit from.

Good Trades All