Oil prices continue to weigh down on EUR/USD and Political Instability in Japan boost USD

[RTFXtrading]

It seems like oil prices still continues to weigh down on EUR/USD. Oil prices slip under $110/bbl as fear of the damage that could be inflicted to oil installations by Hurricane Gustav dissipates. Ahead of Thursday ECB’s meeting the EUR/USD touched low of 1.4484, a level not seen since February 11, 2008 and now the pair is down –0.79% for today’s session at 1.4503.

Direction Japan, the Governor of the Bank of Japan, Masaaki Shirakawa, stated that Japan’s economy may remain sluggish for the time being but will probably avoid a serious downturn. Expressing caution over the global economy, he also said that “The world economy should be regarded as being in the process of a transition to a sustainable growth path”. Adjustment in the world economy seem inevitable as energy and material prices rising in recent months, he said.

By and large Shirakawa repeated what he has said in recent appearances. The market expectation that BoJ will keep interest rate steady at 0.50% would likely be strengthened by his view. JPY is suffering from the political instability as Japan’s Prime Minister Yasuo Fukuda resigned Monday night citing political gridlock. At a press conference on Tuesday Shirakawa said, “ The central bank is closely watching how political conditions affect the financial market and the economy.” USD/JPY touched the session high of 108.73, up 0.35% now at 108.50.