Warren Buffett“A public opinion poll is no substitute for thought.”
Adlin Sinclair“Success is a welcomed gift for the uninhibited mind.”
Asian Session: China Raises Reserve Ratio & Scares Risk Takers
Tue, Jan 26 2010, 09:07 GMT
USD rallied back in the Asian session, as news that China was againraising its reserve requirements on select banks and S&Ps loweringof Japans outlook spooked investors. Yesterday, Wall Street was able toclose on a postive note, but news from China and Japan clouded thesentiment.The Nikkei closed down -1.78%, while Shanghai was down-2.42%. After an encouraging start, the EURUSD traded higher to 1.4180and pushing JPY cross higher as well, but around midday sentimentshifted and risk correlated trades tumbled. With Australia on holiday,Tokyo were the main players in AUD, selling the pair down to 0.8960 ashigh beta trades came under the knife. Outside Asia, political issuesin the US continued to also weigh on risk taking, particularlyBernanke’s potential confirmation of a second term. While the WhiteHouse sounds confident that the Senate will confirm the currentchairman, and positive comment have helped ease concerns, Obama publicmandate is currently being questioned, a rogue senators effecting thevote should be priced in.
In Japan, the BoJ voted unanimouslyto keep the policy rate unchanged at 0.1%. The meeting went widely asexpected with no new policies or adjustments to existingschemes/operations being announced. Core CPI forecast was revisedhigher for fiscal 2010 to -0.5% y/y from -0.8% y/y previously, whichwas followed up by FM Kan stating that Japan could be clearly out of adeflationary environment in 2-3 years with the BoJ help. While hedidn’t elaborate on what monetary policy tools the BoJ has to achievethis feat, they could include increasing the central banks monthlypurchases of JGB. Later in the day the S&P inexpertly loweredJapan’s sovereign rating outlook from ‘stable‘ to ‘negative’. Japan’srating remains at AA, fiscal outlook is unlikely to improve as the newgovernment spending plans restrict any positive adjustment to surgedebt and we would expect other rating agencies to also lower in thenear term.
UK GDP just sqeeked out recession with today q/qprint of 0.1% vs. 0.4% exp , -0.2% prior read (y/y -3.2% vs. -3.0%exp). Perhaps Chancellor Darling comments on today’s GDP data that heremains ‘cautious’ was more than just easing the markets optimism(however, historically UK GDP are revised upwards). The economic datawas very close to the bone and can easily be revised down. Thedisappointing report causedthe GBPUSD to collapse to 1.6150 from 1.6230.
R 2: 0.9148
R 1: 0.9090
CURRENT: 0.8973
S 1: 0.8940
S 2: 0.8905
R 2: 1.0635
R 1: 1.0610
CURRENT: 1.0612
S 1: 1.0530
S 2: 1.0465
R 2: 129.45
R 1: 128.35
CURRENT: 126.95
S 1: 124.40
S 2: 122.15
R 2: 13.015
R 1: 12.975
CURRENT: 12.911
S 1: 12.795
S 2: 12.685
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot