Interest Rate Decisions and Further QE

It has been a busy day today as central banks around the world announced interest rates and quantitative easing for this month .  Japan led the way as the new Bank of Japan governor Haruhiko Kuroda hit the ground running after his first meeting as they announced further bond purchases of 7 trillion Yen ($75bn) a month over the next two years easily beating market estimates of 4 trillion Yen.

This commitment is what the market wanted and they certainly have delivered, the Yen fell 3.4% against the USD following the announcement and Japanese equity markets rebounded from earlier losses.  I expect many foreign investors will be eager to increase their exposure to the 3rd largest economy as other equity markets have hit a recent stand still.  This was certainly evident after the Japanese market closed up 2.20% the futures market rallied a further 2%. 

Back to Europe...Many were eager to here from Mario Draghi following issues with Cyprus and the worsening state of the Eurozone's economy.  Rates were kept the same as expected however, Draghi hinted at lower rates down the line if the economic situation did not improve.  His comments lacked the commitment many were hoping for as previous statements have been bold and provided direction.  The Euro weakened further as the hint of lower rates caught traders ears, however recovered slightly as the day went on.  A weaker Euro will help ease the blow for exporters, and Draghi mentioned an economic recovery should begin during the later part of 2013 (fingers crossed).

Mervyn King may have failed to convince the monetary policy committee once again that further quantitative easing(QE) should be implemented as interest rates and QE were kept level.  The UK's economy has been relatively flat since last month and data has failed to inspire either on the up or downside. 

An interesting time for equity markets, it highlights the importance of sector allocation, some markets this year I expect will massively outperform others so pick wisely.