*Last Updated January 26, 2006, 11:58 pm

Daily report by CMC Markets

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FOREX ANALYSIS

Japanese CPI up but Yen remains under pressure

January 27th - Despite Japanese CPI rising again in data released overnight and in turn adding to speculation that the Bank of Japan may soon start to adjust its stance on monetary policy, the support this news has provided for Yen has been limited with the JPY continuing to trend lower against the dollar. There’s some speculation starting to build that the Fed may not tone down their hawkish stance over interest rates quite as quickly as had been expected previously and we’ve also see a number of upward revisions of the Q4 GDP figure that’s due for release later today. With little else on the economic calendar, we may now see a phase of consolidations ahead of the GDP reading and depending how this falls with expectations, further movement in either direction by the dollar can be expected ahead of the weekend break. Surging oil prices are also likely to start weighing on the Japanese economy and as a result the emerging situation in Iran is likely to remain very much in focus. Just how aggressive the BoJ can be with interest rate policy if crude is trading at over $70 a barrel is without doubt a matter for some debate – USD/JPY really could go either way just now, but a rush to new lows for 2006 below 114 seems increasingly unlikely.

Stuart Scrase and Enis Mehmet



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