*Last Updated July 11, 2006, 12:27 am

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FOREX ANALYSIS

Yen in focus ahead of rate meeting; consumer confidence disappoints

July 11th - With the Bank of Japan’s monetary policy meeting scheduled to start later this week many are eyeing the Yen amidst speculation that the central bank will at last start to tighten interest rates. There’s been a degree of volatility on pairs such as USD/JPY as traders attempt to interpret each piece of data, however it still seems far from certain that the climate is right just yet after consumer confidence readings released overnight disappointed once again. After touching the break-even 50 mark in April, we’ve now seen two successive months of contraction, the Yen has started to weaken once again and the question has to be asked whether this is in anticipation of a rate hike or if a move away from the ultra-lax policy would indeed cause further damage. The recent machinery order data also showed a slowdown and although this drop was a little less than had originally been expected, the economy clearly remains far from robust. Elsewhere UK trade balance data will be under scrutiny but otherwise the economic calendar is looking generally quiet. Traders will doubtless continue speculating as to where rates will go next with this news but overall it’s proving difficult to call the direction in the shorter term…

Tim Wilbraham and Enis Mehmet



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