The Japanese newspaper Sankei reported that the BoJ is considering expanding their injections of liquidity through new funds-supplying operations which began last December. This is nothing really new for the Yen and should continue to have a muted effect; the only newsworthy idea in the article is that the expansion of liquidity is occurring later than many participants had initially thought. Within Forex the news cause a small bounce in the USDJPY, but we know that if Japanese policy makers are truly looking to back down the Yen, bolder steps are required.
Also in Japan, rumors were spreading throughout trading floors that an emergency meeting was to be held today concerning the Yen, but the BoJ quickly quashed the claims. The scheduled meeting between Prime Minister Kan and BoJ Governor Shiwakawa will take place early next week. We are selling the USDJPY off at the 85.30 level in anticipation that the BOJ will come up with a strong response sooner than the market expects.
The second article causing a buzz today is from the German magazine Spiegel. The piece suggested that the Greeks have gone too far in appeasing the IMF & the market's desire for austerity. As we stated in the beginning of the summer, there was always a concern that deep cuts in Greece would drag the economy into a negative death spiral. It now appears to be coming true as growth and employment figures continue to come out overly weak in the troubled state.
Greek / German 10 yr spreads hit a 3 month high on the back of this article. There is now speculation that Greece's fundamentals have crossed the event horizon and reversing course now won't be as easy as slashing-n-burning austerity measures. To turn the tide in Greece, some ultra-loose spending should be considered.
Today' UK Retail Sales printed much higher than the market anticipated, coming in at 1.1% m/m verse the widely expected 0.3%. With yesterday's minutes projecting a very balanced BoE tone, Andrew Sentance's strong appeals may pick up a few supporters if UK fundamentals hold up. Any shift towards tightening and away from quantitative easing will give the GBP a solid boost - especially against the embattled Euro.
The US will be releasing some light data today which all together should be a non-event. We suspect hot/cold, on/off risk sentiment to continue and we'll be looking to trade the ranges across various markets. Start fading risk-averse trades this afternoon.
Today's Key Issues (time in GMT): 08:00 NOK GDP p 0.4 exp, 0.1 prior 08:30 GBP Money Supply 08:30 GBP PS Net Brwing 08:30 GBP PSNCR 08:30 GBP Retail m/m y/y 0.3 (0.6) exp, 0.7 (1.3) prior 09:00 CHF ZEW 10:00 GBP CBI Orders 12:30 USD Initial jobless claims, thous 484 (474) prior 14:00 USD Philly Fed 7.5 exp, 5.1 prior 14:00 USD Leading indicators 0.1 exp, -0.2 prior 16:00 Turkey: Interest rate announcement, % 7.0% exp/prior 16:30 USD St. Louis Fed President Bullard (FOMC voter) speaks 17:00 USD Chicago Fed President Evans (FOMC non-voter) speaks