American focus: BOJ’s promise to keep it's benchmark on a “very low"

The yen dropped after the Bank of Japan said it would keep interest 

rates  “very low'' following the first 25 b.p. increase in borrowing costs 

in six years. 

Japan's currency fell to a three-week low against the dollar as traders 

speculated the central bank won't make any hikes for the rest of the 

year. FED and ECB will likely continue tightening that bolster US assets as 

the deferential gap is still in favor for USD. 

The Bank of Japan finished it's 2 days meeting with a decision on a 

rates lift up to 0.25 % from almost zero level. But this was already 

priced by the market. The BOJ Chairman Toshihiko Fukui said three 

from nine Council members voted for 0.5 % key rates hike. 

Fukui told the bank doesn't  plan to raise rates consecutively.'' 

Last time the central bank raised interest rates in August 2000, but only to cut 

them back seven months later to almost zero percent as a economy 

testified slowdown. 

The BOJ has been under pressure from officials including Finance 

Minister Sadakazu Tanigaki, who today said that it's too early to discuss the 

timing of another rate increase. The bank's decision means the coming end of 

deflation era, Prime Minister Junichiro Koizumi said. 

Meanwhile USD strengthened generally versus all main currencies. 

The dollar gain was briefly pared after a government report showed US 

retail sales unexpectedly fell in June. The report showed 0.1% drop. 

The core index ex-auto added 0.3%  that is similar to prior month 

figures. 

Preliminary University of Michigan consumer sentiment index fell to 

83.0 versus forecasted 86. Weak data fuel the evidence of possible economy slowdown. It may bring back the speculations on Fed pause. 

Meanwhile interest-rates futures are priced in 52% odds of an another 

quarter percentage point increase to 5.5%.

Wall Street continued last two days drop on Friday mainly amid oil 

record jump, escalating violence in the Middle East, neutral GE report 

and weak US data. 

Corporate news: General Electric reported on Q earnings lift fueling 

forecasts. Current Q-report also meets analytics expectations. This led 

to 1% shares drop.

General Motors was off after Nissan and Renault CEO refused to take the 

same position in  GM even if the alliance will take place.