Bernanke Looks Likely To Secure Second Term

AUDUSD R 2: 0.9405 R 1: 0.9325 CURRENT: 0.9050 S 1: 0.8960 S 2: 0.8900

USDCAD R 2: 1.0700 R 1: 1.0600 CURRENT 1.0560 S 1: 1.0220 S 2: 1.0205

EURJPY R 2: 132.40 R 1: 131.00 CURRENT: 127.30 S 1: 126.56 S 2: 124.40

USDMXN R 2: 12.150 R 1: 13.100 CURRENT: 12.919 S 1: 12.575 S 2: 12.487

Market Brief

The Asian equity markets have started this week lower as risk aversion continues to dog the financial markets. The dollar had been hurt last week by news that the Senate might not confirm Ben Bernanke's position before the end of his first term on 31 Jan; unsettling a market already fragile from last week's Obama speech. However subsequent support has begun to flow in from various senators including the Republican leader, soothing concerns for now. With very little on the data calendar, we expect EURUSD to remain range bound for now between 1.4030 and 1.4220.The BoJ have begun their latest two-day meeting today, and whilst there is not expected to be any change to interest rates, it will be interesting to gauge the reaction to last week's dip in USDJPY below 90.00 (revisited again this morning in early trading). Recently appointed Finance Minister Kan previously stated his preferred range for USDJPY was 90-95; but has since sought to distance himself from the remarks by stating in parliament that markets decide FX rates for themselves. Now, the focus will be on whether the BoJ have any stronger sentiments about the possibility of intervening at these levels.

In Australia, Q4 PPI data came out lower than expected, dropping -1.5% YoY against estimates for a -0.9% reading. This is likely to adjust market expectations for CPI inflation in the coming months, and may lend support to the idea that the RBA may pause after the next 25bp hike (expected at the next meeting on 2nd Feb). Nevertheless, AUDUSD has held up relatively well, currently trading around 0.9050.

Meanwhile, the SNB's Hildebrand was quoted in the Wall Street Journal on Friday; warning that the SNB would 'resolutely' prevent 'excessive' gains in the CHF as long as deflation risks persist. He also suggested there were residual risks of deflation in Switzerland despite CPI turning positive over recent months, implying further intervention could be possible.

Today's data calendar is light with only US Existing Home Sales due.