Shares hit pause and the dollar lost ground against the yen as investors awaited the outcome of Federal Reserve and Bank of Japan meetings. As David Pollard reports, they're both dealing with very different dilemmas.
With not one but two central bank meetings in the diary, markets are already on hold. What's the point of trading, many ask, especially when there's a split in thinking on what one of them will do? SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "I think the Bank of Japan meeting promises to be the most interesting meeting .... On one hand, they really could express a lack of confidence in the policies such as quantitative easing and negative interest rates. .... On the other hand, of course, they could go forward and say they do need to carry on with these policies in order to try and achieve their inflation target." Some form of easing is seen as likely after the BoJ stunned markets last January with negative rates. Though the Fed's December rate hike is an even more distant memory - one it appears to want to forget. The US central bank expected to lower its longer-term interest rate forcecast at this week's meeting. A further hint that more rate hikes aren't in the breech just yet. SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "The Fed do keep on cutting the forecast. If we go back to the start of last year, the market was anticipating the Fed would start hiking last June and start hiking progressively from that. Now, of course, the inability of the Fed to do that really is linked with the outlook for the global economy." There are domestic concerns too. (SOUNDBITE) (English): DARREN SINDEN, INDEPENDENT MARKET ANALYST, SAYING: "To my mind, I think we might see the Fed hold fire in September, miss out November because of the US election, and perhaps pull the trigger again in December if the economic data justifies it." Which after recent weak retail sales data, it might not. While in Japan, despite an already huge programme of stimulus, inflation fell 0.5 percent in July from a year earlier, the fifth drop in five months. The last time the BoJ hits its 2 per cent inflation target also a fading memory.