Amid Rumours The European

The BOJ stays committed to achieving its inflation target, but it fails to impress the market As we expected the BOJ kept the overnight rate at <0.1%, expanded its asset purchase program by JPY10 trillion and extended the maturity of JGB buying to 3 years from 2 years. There were some market rumours that the bank would disappoint the market by not increasing its APP which was making some investors nervous, thus there were some market moves initially following the release. USDJPY initially sunk lower on the back of the news, before shooting in the other direction. The only half-surprise to the market from the BOJ was the extension of the BOJ's bond purchases to 3 years. Thus, the Nikkei 225 and USDJPY retraced all of their respective gains shortly after posting them. The Nikkei 225 is ...

The Week Ahead Highlights Searching for the next crisis? What's driving the dollar? Europe: what happened to the LTRO? Searching for the next crisis A couple of weeks ago the market was able to shrug off the prospect of a Greek default and a sharply rising oil price. Even weak Chinese economic data didn't de-rail risky assets. However, that optimism didn't last long and last week investors removed the rose-tinted spectacles and started to worry once more about the outlook for the global economy. Last month China's growth rate was downgraded to 7.5% per year from 8%. Since China has a history of out-performing expectations this downgrade had little market impact. However, a fifth straight decline for the HSBC/ Markit manufacturing PMI survey reading and the markets are ...

Fundamental Analysis EUR "The improvement is largely due to ongoing exports gain" - Dominique Barbet, an economist at BNP Paribas The euro zone's current account surplus rose to 4.5 billion euros in January, the highest level in almost five years, from 3.4 billion euros in December, said the European Central Bank on Monday. USD "While builders are still very cautious at this time, there is a sense that many local housing markets have started to move in the right direction" - Barry Rutenberg, chairman of the NAHB Homebuilder sentiment remained unchanged in March from February, said the National Association of Home Builders on Monday. The NAHB/Wells Fargo Housing Market index stayed at 28, the highest level since June 2007. GBP "Early indicators suggest that property market activity in ...

Fundamental Analysis EUR Moody's has downgraded Greek credit rating again from "Ca" to the lowest level of "C". The rating agency cited high risk of country's default even despite deal with its bondholders on almost 70% debt write-off. The deal will allow Greece not to return about 107 billion Euros to the private investors. Moody's stressed that planned reforms to avoid default are likely to face essential implementation risks. USD American International Group (AIG), which obtained USD 182.3 billion rescue package after the breakdown of Lehman Brothers, is preparing to sell USD 6 billion of AIA group stocks to repay debt to US government. Insurer is offering around 1.7 billion AIA equities at HKD 27.15 to HKD 27.50 per share. After the sale AIG will keep about 19% stake of AIA. GBP ...

Despite starting Thursday off on a promising note, the euro managed to tumble against most of its main currency rivals as the euro-zone debt crisis continues to drive investors away from the currency. With analysts forecasting an increase in today's US New Home Sales figure over last month, it appears unlikely that the euro will reverse its recent bearish trend. Economic News USD - Unemployment Claims Boost USD Ahead of Holiday Weekend Yesterday's US Unemployment Claims gave the USD an added boost against its main currency rivals ahead of the holiday weekend. The latest unemployment figure came in significantly below analyst expectations at 364K, the lowest level since April 2008. The positive jobs report gave further incentive to investors looking for a safe haven outlet in the wake ...

The week ahead is likely to be dominated by issues of trust or, to be more precise, a lack of trust with the banking sector likely to be a key focus. If funding pressures cannot be alleviated, there will be the growing threat of a major European bank failure which would put risk appetite under severe pressure and leave the EU Summit deal in tatters. The Summit has to be one of the most bizarre in recent memory. Leaders may be relieved that they have managed to get through this exercise without causing a market meltdown, but it is very difficult to believe that the key players actually think that they have improved the underlying Euro-zone outlook. The meeting was fundamentally a political exercise as this was the only way to cover-up the lack of any real achievement and prevent an even ...

Fundamental Analysis EUR "Today's financial problems reflect public budget policies of past years" - Ignazio Visco, Governor at the Bank of Italy Italian borrowing costs rose to record highs since the creation of the European Monetary Union with investors demanding up to 7.814 per cent for 2-year government bonds during an auction on Friday. USD "Businesses are very cautious so they’re not hiring and they’re not distributing their profits to consumers" - Michelle Meyer, a senior U.S. economist at Bank of America Corp. U.S. consumer spending may decline in upcoming months amid worse than expected income gains and only modest improvement in employment, show the data published by the Commerce Department. GBP "We don’t see any significant improvement or a change in conditions coming soon" ...

Weekly Focus: Debt Crisis Intensifies Amid Encouraging Data Market Movers ahead * The evolving European debt crisis will remain a key theme. Next week a Portuguese bill auction and the Spanish bond auction will test the market. * The ECB is expected to announce a continuation of its full allotment policy on the current terms through Q1 2011 at its monetary policy meeting. * In the US the ISM and the employment report are expected to draw the headlines. We look for confirmation of the recent tendency toward improving data. * In Asia the focus will be on the PMIs out of China and Japan, which is set to improve modestly. * In Scandinavia, Sweden and Denmark are set to report national account figures for Q3. In Sweden and Norway the focus will be on the PMI reports as ...

€ The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3585 level and was capped around the $1.3740 level. The common currency came off significantly amid rumours the Federal Reserve planned an intermeeting increase in the discount rate later today. While a move in the discount rate would probably not have a major impact on market liquidity – such a move would be largely symbolic – it would be the latest indication that policymakers are looking to normalize policy as much as possible without lifting the federal funds target rate. The Fed’s balance sheet increase US$ 25.5 billion last week to US$ 2.31 trillion. Also weighing heavily on the common currency was a report that Greek Prime Minister Papandreou called on the European Union ...