Monday, June 23, 2014

The Japanese yen Gold 6/23

The Japanese yen is firm on Monday, as the pair trades in the low-101 range. On the weekend, BOJ Governor Haruhiko Kuroda said that that the central bank’s monetary stance had led to economic growth but inflation remained below target. Japanese Flash Manufacturing PMI improved in May, pushing above the 50 line which separates between expansion and contraction. In the US, today’s highlight is Existing Home Sales.
Speaking at the International Economic Association in Jordan on Sunday, BOJ Governor Kuroda sounded upbeat about the Bank’s quantitative and qualitative easing policy, introduced in April 2013. Kuroda noted that growth had improved and deflation curbed, but that inflation was around 1%, well short of the target of 2%. The BOJ had hoped to reach its inflation target by 2015, but Kuroda acknowledged that this goal would take longer, and BOJ would continue its current stance of large-scale monetary easing.
Gold is stable on Monday, following sharp gains last week, when the metal gained about 2.8% against the dollar. The metal remains above the $1300 level as the fighting in Iraq continues. On the release front, today’s highlight is US Existing Home Sales, a key event.
The fighting in Iraq continues, as militants linked to al-Qaeda have overrun the north of the country. The insurgents are only about 60 kilometers from the capital of Baghdad, and the situation has quickly escalated into a major crisis for both the Iraqi and US governments. Over the weekend, US President Barack Obama said the crisis could spread to other countries in the region. The turmoil in Iraq, a large oil producer, has pushed the price of gold above the $1300 level, as the metal is considered a hedge during periods of geopolitical instability.