European Central Bank President Mario Draghi had a particularly interesting speech in which he mentioned that his institution is ready to act, stating, “We stand ready to adjust our policy stance further.”
The inability of the U.S. dollar to significantly strengthen against its G10 counterparts dominated market chatter earlier this year, but a more hawkish Fed backed by strong US economic data appears to have changed the fortunes of the world’s most traded currency.
The yen rose the most in almost a month versus the euro on speculation the Bank of Japan stimulus is boosting the economy while the European Central Bank will expand currency-debasing measures to revive growth.
In 2013, forex trading was linked intimately to expectations regarding changes in the Federal Reserve’s quantitative easing policy. Certainly, in 2014 market expectations will continue to focus on the future of tapering policy.
Japan’s inflation accelerated to the fastest pace since 2008 last month, bringing the rate closer to policy makers’ target while threatening to erode household spending power unless employers boost wages.