2012 Trading Year Begins
HAPPY NEW YEAR
The holiday provided a much needed rest. Back to trading!
JAPANESE INTERVENTION: CAN THEY DO MORE?
JAPANESE INTERVENTION: Can they do more?
According to Reuters Japan has continued to intervene in the fx market since it pushed usdjpy up on October 31st.
If this is correct it marks a change in tactic in fx intervention for Japan which in recent years use a more direct approach of earlier warnings followed by a press statement after the fact. Trading evidence provided by Reuters showed that Japan most likely continued to intervene using a stealth approach using small amounts to curb the fall of usdjpy. By law, the govt does not have the right to print cash directly and it must fund intervention by issuing financial bills, usually Fbs of 3 months. The Ministry of Finance sets the intervention cap and the Bank of Japan, which is legally independent, prints the cash and conducts the operations.
Unless the govt increases the intervention cap, which it recently did with a supplementary budget, the BOJ still has roughly 38 trillion yen of ammunition of the 165 trillion legal cap. To put things in perspective, the BOJ total intervention amount from 2003 to 2004 when it intervened in the markets was 35 trillion.
It is too early to call all the ammo.
Other than debating another supplementary budget in a split parliament to increase the cap, the govt can sell foreign assets to the BOJ and use the proceeds to fund further intervention. It is estimated that this could provide an easy additional 10 trillion plus...
Italian Yields Take out the big 7
Italian 10 Year Bond Breaks Above 7%!
UK Worries over Inflation
UK WORRIES OVER RECESSION
By now most traders that follow economic indicators have gotten used to the never ending negative prints. And obviously, the current crisis in the euro zone is not helping any.
Even CBI, a leading business lobby (Confederation of British Industry) expects unemployment to rise in the coming year, although they maintain a slightly positive outlook stating that they do not expect a recession but a gradual slow recovery. In a recent statement the CBI warns the govt to not water down the austerity pledge and remain on course towards erasing the govt's massive budget deficit.
Economic indicators have been very negative and has triggered many successful short positions here at HappyTradersFx, although we have been on the sidelines in the past week as we see signals of a short squeeze.
The fear of a recession in the UK has made the headlines in recent months. While inflation remains well above the BOE's target range the bank has decided to support the economy with a fresh round of Quantitative Easing during the last meeting.
The CBI remains cautiously optimistic by cutting its growth forecast to 0.9% this year and 1.2% the next. They note that the risk of a double dip has risen but that their main forecast remains for slow moderate growth.
Europe is the UK's major trading parnter and relies on exports to European countries. The fear of a major financial meltdown in Europe has had a huge impact on business sentiment in the UK causing many businesses to hold off hiring new workers.
INFLATION
The CBI shares the BOE's view that inflation is to continue to ease. Expected to fall from its current rate of 5.2% to 2% (BOE target) by March 2013. Economic indicators also support this outlook and we have continued to trade sterling on the short side.
AUSTRALIAN SENTIMENT RISES FOLLOWING RATE CUT
Australia Rate Cut Seen as Positive by Mortgage Holders
consumer sentiment rises
TodayAustralian consumer confidence jumped to a six-month highs in November as a cut in interest rates lifted optimism about the economic outlook in Australia.
The survey of 1,200 people by Westpac Bank and the Melbourne Institute showed its index of consumer sentiment rose 6.3 percent to 103.4. The previous month saw a rise of 0.4%. This was the third month of gains.
Compared to last year the overall index is down 6.7%. Today, however see optimists outnumber pessimists for the first time since June of 2011.
The Reserve Bank of Australia (RBA) cut its main cash rate by 25 basis points to 4.5 percent last week, the first easing in over two years. Any move in rates usually has a big impact on sentiment in Australia, where 95% of all home loans are on variable rates.
Confidence
Those that have a mortgage: rises by 13.9 % in the month
Home owners mortgage free: rises by 6%
Tenants: falls by 6.8%
Data also showed that people have a concern about the rising living and utility costs in the next 12 months.
Data measuring whether it was a good time to buy?
Major Household Items: rises by 1.8%
A House: rises by 6.5%
A vehicle: falls by 3%
Overall, the survey's expectations index rose 8.1 percent to 100.9, while its index of current conditions increased by 3.9 percent to 107.0.
SENTIMENT TURNS BEARISH FOR THE AUSSIE
Speculators turned net short once again shows CFTC data earlier today. The following chart paints a clear picture showing what I would describe as the biggest short squeeze of all time. While sentiment remained net negative for the Aussie during 2010 and throughout the majority of 2011, audusd continued its slow and painful gains.
In August, positioning breached the flat line but retreated the following week for a dip. September saw a surge in Aussie long interest which peaked in October and has since declined. Today's data shows that once again speculators are net short.
EURO NEW YEAR FORECAST
Leading Banks Remain Bearish on Euro
Reuters surveyed the leading banks and financial institutions on their prediction for where eurusd will be trading at the start of the new year. The dominant view is very bearish for the next 3 months and, on average, the start of the new year is expected to trade at around 1.3500 which is still significantly lower than the current 1.3800 region.
Banks with very bearish outlooks on the euro see eurusd trading at 1.3000 in January. These are Morgan Stanley, Bank of America, Japan's Nomura, Lloyds and Barkleys.
The Euro Bears
EURUSD @ 1.3000 in January
- Morgan Stanley
- Bank of America
- Nomura
- Lloyds
- Barkleys
Sideways
Goldman Sachs, HSBC and a number of other banks see most of the moves in EURUSD already played out and expect the pair to finish the year at around the current levels of 1.3800.
Sideways from Here:
- EURUSD @ 1.3800 in January
- Golman Sachs
- HSBC
The Lone Bull
The majority of Euro bulls have bailed by revising their stance. Not so BNP Paribas, which expects EURUSD to trade at 1.4500 at start of the year.
EURUSD @ 1.4500!
- BNP Paribas
Source: Reuters
THE BANKSTER 29 CLUB
Capital Surcharge plan on the top 29 Bank
The G20 listed the 29 most important banks this weekend along with new policies and regulations for the 29 to ensure that we don't suffer another "too big to fail" rescue package.
THE BANKSTER 29 CLUB
AMERICAN BANKS
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Bank of America
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Bank of New York Mellon
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Citigroup
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Golman Sachs
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JP Morgan Chase
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Morgan Stanley
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State Street
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Wells Fargo
EURO ZONE BANKS
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(France) Banque Populaire CdE
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(France) BNP Paribas
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(France) Crédit Agricole
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(France) Société Générale
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(Germany) Commerzbank
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(Germany) Deutsche Banks
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(Italy) Unicredit Group
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(Spain) Santander
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(Belgium) Dexia
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(Netherlands) ING Bank
UK BANKS
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Barclays
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Lloyds Banking Group
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Royal Bank of Scotland
SWISS BANKS
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Credit Suisse
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UBS
SWEDISH BANKS
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Nordea
JAPANESE BANKS
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Mitsubishi UFJ FG
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Mizuho FG
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Sumimoto Mitsui FG
CHINESE BANKS
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Bank of China
HONG KONG BANKS
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HSBC
G20 CANNES SUMMIT TIDBITS
G20 Cannes Summit Tidbits
What you need to know:
More calls for China to let its currency float
Stronger language was adopted to call for China to let its currency move by “market-driven exchange rates”.
- Conditions were placed by members for their helping EZ
The BRICS (Brazil, Russia, India, China, and South Africa) stated that they were open to investing in EZ via the IMF. They noted that the Euro Zone is a very important market for China and Brazil exports and that a financial meltdown in the EZ would impact global economic growth significantly. Support will be based on IMF policy.
- Bill Gates Financial Transaction Tax proposal fails
In a report to the G20, Bill Gates proposed a tax on financial transactions, aviation and shipping fuel, and tobacco as a way to raise money to assist poorer countries did receive some support from France but was blocked by the USA, Britain, and Canada. The rich stay rich and the poor stay poor!
- Capital Surcharge plan on the top 29 Bank
The G20, perhaps responding to global social pressure, publicy listed the top 29 banksters well actually “29 important banks to the world's financial system”. The financial Stability Board, a regulatory taskforce of the G20 listed the banks and announced that the banks will be required to accept greater capital and closure surveillance compared to other banks not on the list include other regulations to ensure that in the event of failure taxpayers will not be called upon for support.
- Sarkozy condemns Iran's nuclear program and defends Israel
Sarkozy said that France would react to support Israel if threatened. The weekend has been filled with similar comments from the USA over weekend. Fox is having a field day.
- China willing to help EZ, waiting for clearer details
Political pressure is building in China among the population to not blindly run to the aid of Europe. Blogs and TV shows are buzzing this weekend with the debate over “rescuing” the Europe. Officials from China have stated “we cannot look on and not help”. The government however is under some political pressure on the issue.
- Bank of Canada head Carney to chair the Financial Stability Board
He replaces Mario Draghi, who took over the head of the ECB.