Last week's news were dominated by the Bank of Japan doubling its monetary easing efforts. BoJ governor Haruhiko Kuroda's announcement quickly sent the JPY down on Thursday, giving the currency's downward trend new momentum. The central bank decision is likely aimed at supporting the economy by forcing private citizens and companies alike to dispense their savings in light of future inflation and the BoJ buying up the majority of government bond issuance. The BoJ communicated a 2 percent inflation target within two years. Whether this is sufficient to alter inflation expectations in such a way that the country's chronic deflation problem can actually be reversed remains to be seen. Betting against central bank actions remains a very risky strategy, however. Currency investors will have little choice but to short the Japanese yen, while equity investors may be well-advised to go long the Nikkei 225. At the end of Friday trading, USD/JPY was quoted at ¥97.5, GBP/JPY at ¥149.6 and EUR/JPY at ¥126.7.
In Europe, neither the European Central Bank nor the Bank of England took any drastic actions. Both central banks kept interest rates constant, but ECB president Mario Draghi cautiously hinted at future rate cuts if the economic situation does not improve and governments fail to implement structural reforms.
More important news came from the United States on Friday. US nonfarm payroll employment data disappointed. Only 88,000 new jobs were created in March 2013, way below economists' estimate of 190,000 and marking a nine-month low. New concerns about the economic recovery in the United States were sparked with regard to austerity measures beginning to show skid marks. During the first two months of the year, it seemed as if the US economy would get through the fiscal constraints rather unharmed, but now market observers are afraid the economic recovery might once again stall after a strong start into the year. Consequently, the US dollar dropped in value against most major currencies at the end of the week, with EUR/USD trading at $1.299 (up 200 pips from Wednesday) and GBP/USD at $1.533.