Trading Video: Euro and Yen Pairs on Edge as Officials Talk Stimulus

Talking Points:

• Monetary policy regimes are proving the primary fundamental driver for the broader FX market

• ECB officials sounded a contradictory tone to ECB President Draghi on the suggestion of outright QE

• A mixed message from BoJ policy recalls last week's Fin Min warning of a Yen dropping too far too fast

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Monetary policy is set to leverage greater volatility and take the reins of trend for the FX market this week. With the liquidity drain expected into the US holiday Thursday, the concentration on contrasting views between the Fed, ECB, BoJ and others is intensifying. Where each individual central bank stands relative to its counterparts has proven just as much a driver for exchange rates as the net level of stimulus has buffered speculative appetites. At the start of the new trading week, though, it seems clear messages are starting to grow blurred. Two ECB officials contradicted President Draghi's press towards outright QE by questioning its utility and legality - which also would see the Euro rally. Meanwhile, the BoJ minutes this morning have highlighted a louder divergence amongst policy members on the path towards more stimulus. Are these clear themes at risk of shifting? What's the potential risk for FX and capital markets? We discuss this in today's Trading Video.

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