- - The overnight releases of Chinese PPI and CPI failed to garner the excitement they had promised, with Asian stocks managing a mixed performance. CPI did print a 16 mth high of 2.7% y/y but at these levels the rise in inflation can still be deemed as relatively moderate (CPI hit 8.7% y/y in 2008). That said the strength of Chinese loan data suggest that inflationary risks are firmly bias to the upside and have been sufficient to trigger speculation that CPI will rise above the 3% government target in the months ahead and bring forward a BoC rate hike potentially into Q2 this year. The threat of Chinese monetary tightening pushed the JPY higher overnight in a move that was largely unwound in London hours. Speculation that the BoJ will announce addition monetary stimulus on the March 16 policy meeting continues to undermine the JPY. On first sight this morning’s downward revision to Japan’s Q4 GDP to +0.9% (From 1.1% q/q) enhances the pressure on the BoJ to act further. However, much of the downside revision comes from inventories. The fact that Japan’s GDP is yet to benefit from a bounce in inventories is in fact encouraging for the Japanese economic outlook. While the Japanese economy may be in recovery mode, deflation remains a threat suggesting more policy measures are likely. While USD/JPY is likely to trend higher over the medium-term encouraged by interest rate differentials, the path of USD/JPY in the coming weeks may be distorted by repatriated demand for yen in the approach to Japanese fiscal year end. Full text »
del.icio.us | Technorati | Stumble It! - - Today was certainly not the exciting day that most envisioned due to the heavy hitting line up of top tier data from down under as well as China. The day began early, with New Zealand’s RBNZ leaving rates unchanged at 2.50% as expected, but the following comments from Governor Bollard were translated as dovish, sending the NZD/USD from 0.7060 to 0.7030, in a swoop, but to eventual lows near 0.6975 as the session progressed. AUD/NZD benefitted from the poor response to the commentary, posting 50 pip gains on its way to 1.3080 highs. Australian employment data followed, with the 5.3% unemployment rate expected, but employment posting a flat number of 0.2K vs. the 15.2K expected. The data was taken in stride however as forecasts have been beaten over the past five months by the G10 leading economy, keeping the AUD/USD choppy between 0.9115 and 0.9155. Full text »
del.icio.us | Technorati | Stumble It! - - The NY session brought about another rollercoaster in stocks but the overall flavor was for heightened risk appetite. US stocks have now rallied in eight of the last 10 days in broad terms, for a net gain of nearly 4% in that span. The oscillations elicited similar price action in the yen crosses. EUR/JPY jumped towards the 124 area after opening the session about 100 points below there – closing near the 123.50/60 zone. Meanwhile, USD/JPY rallied from 90.40 to session highs just above the 90.80 area (where the Japanese export community was ostensibly selling the pair), only to close back near the 90.50 mark. Full text »
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