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Japan inflation rate delayed |
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Thursday, 18 January 2007 |
- Bank of Japan puts back interest rate hike from today to February 21st
- US CPI at 13.30pm is the focus for this afternoon
The big news this morning comes out of Asia after the Bank of Japan
voted 6-3 to leave interest rates on hold at 0.25% with Governor Fukui
indicating interest rates will be hiked slowly. The Japanese Yen was
hammered after the decision and has now lost 6%of its value in the last
6 weeks. Last night the US Federal Reserve released the Beige Book for
January which is an anecdotal summary of current economic conditions in
the 12 Fed districts. The book indicated moderate growth, tightening
labour markets and moderate wage and price increases pointing toward a
soft-landing scenario for the States. More importantly today at 13.30pm
the US December CPI data is expected to show that annual core inflation
(inflation without food and energy) inched up to 2.7% which is above
the Fed’s comfort zone, thereby confirming interest rates are likely to
stay on hold for the foreseeable future. Later today we have US
December housing starts which will be very interesting, as the Beige
book pointed to softening housing markets, although last nights
National Association of House Builders data and other indicators have
recently suggested the fall in US housing has “bottomed-out”. At
17.00pm tonight for those still at their desks the January Philadelphia
Fed Index should show a pick-up in manufacturing in that region. So
basically a day jam-packed with important US data releases which will
almost certainly move the market around - enjoy. Did you know that
Romanian snowboarders blocked traffic in front of the national weather
institute in Bucharest to complain about the lack of snow. The sit-down
protest ended only when weathermen told them their complaint "would be
passed on to a higher authority".
GBPCAD keeps on
trucking higher as commodity prices come under pressure and investors
sell the CAD based on their concerns the US (Canada’s biggest trading
partner) economy will experience a hard-landing scenario thereby
hurting Canadian exports. At C$2.30 those migrating to Canada or buying
property there have 18% more purchasing power than a year ago - not
bad! The concern we have is that when we chart the GBPCAD exchange rate
it points to the most overbought levels in 3 years. The last two time
it was this overbought the exchange rate fell 16 cents lower. If
history repeats itself (and it always does) then the GBPCAD rate will
correct sharply - the difficult question is from what level? For those
of you intending to emigrate to Canada we recommend you be careful
because if the exchange rate is about to correct then this could cost
you £15,000 assuming your moving net wealth of £200,000.
The full detailed list of US data due for release today is too long to
fit on a small report like this but a quick run through may give you a
flavour of the potential for volatility. Producer prices, inward
investment into the treasury market, industrial production, the NAHB
housing market index and the Fed’s Beige Book are all set to accost us
throughout the day. Add to this speeches from two voting members of the
Federal Reserve and tomorrows barrage of inflation, weekly jobless
claims, housing starts, the Philadelphia Fed business sentiment index
and spikes and troughs in the GBPUSD exchange rate are as sure as eggs
is eggs. The timing of the releases and the accuracy of market
forecasts will be the determining factors in the magnitude of the
volatility and that will keep all traders on their toes for the next 48
hours. I think it is safe to say that with GBPUSD testing the very top
of its range and so many reasons for traders to be wary, both buyers
and sellers of the US Dollar against the Pound will have chances to do
rather well in the coming two days. Just let us know what you need to
achieve and we can assess the best way to achieve it.
Just think of how stupid the average person is, and then realize half of them are even stupider!
George Carlin
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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