The dollar gained broadly yesterday and today as ISM manufacturing data rose to 35.6 in January from 32.9 – beating expectations for a continued decline to 32.5. Many economists believe the decline in the world economy is no longer in it's most rapid stage. The EURUSD has been trading a 1.2800 – 1.2915 range since 17:00 GMT yesterday – While the EUR fought back in previous sessions the dollar continues to shine through, current retracement move initiated Jan 28th which brought us from 1.3329 to 1.2703.
The Japanese government announced this morning it would set about buying financial stocks through April 2010 in a bid to boost the capital of financial institutions. The 1Trillion Yen ($11.1 Bn) stimulus package comes after President Obama stated his concern over the intervention-like action by China as of late in a bid to weaken it's currency – the likelihood the U.S would accept such antics from Japan are low. The Yen took a dive on this announcement, but continues to trade a broad 88.05 – 91.34 range (looking at a monthly), any break out of this range could pave the way for a strong trend.
The RBA announced its own addition to its stimulus package – with a plan to spend A$41.5Bn ($26.5Bn) in cash grants to low/middle income families and infrastructure, A$12.7Bn and A$28.8Bn respectively. However the news that everyone was waiting for sent the Aussie sky high, jumping 70pips on the 100bps rate cut. The benchmark now stands at 3.25%. While this is the lowest level interest rates have been in 45 years – both the AUD and the NZD remain high yielding assets compared to the 0.1% Yen, 0.25% dollar – carry trades are imminent on AUDJPY and NZDJPY.
Continued weakness in the Euro zone and the unwillingness by the ECB to use un-orthodox methods to tackle the global current economic downturn and a lack of a concerted effort set sentiment largely bearish in the near to medium term.