Monday, 1 February 2010

MARKET UPDATE: Central Banks take centre stage

 Monetary Tightening in China and Greece’s debt woes have caused risk aversion to take a turn for the worse over the past fortnight
 There have been spikes in currency and equity market volatility and risk currencies have remained under pressure, including AUD, NZD, CAD and man emerging market currencies
 Greece’s problems remain a major burden on the EUR, with speculative sentiment for the currency dropping close to all time lows, as recorded by IMM data
 Markets will have much else to focus on this week, with various manufacturing and service sector PMIs, four major central bank decisions, and the January US non-farm payrolls report, due for release
 The most interesting central bank decision this week is likely to be that of the Reserve Bank of Australia. Recent data has if anything given more reason for the central bank to raise interest rates, including the latest release which was the TD Securities inflation gauge, which jumped 0.8% in January, the biggest increase in 6-months
 The UK Bank of England is unlikely to shift policy at its meeting on Thursday the statement will be scrutinized for clues as to whether quantitative easing is over
 IMM Data shows net short aggregate USD speculative positions have dropped sharply, with USD positioning close to being net flat
 Appetite for carry trades was not be helped by a report in the UK press, which fuelled a sell of in JPY crosses. The UK’s Lord Turner has signalled a regulatory crackdown on FX carry trades, but it is thought this would be impractical to implement

These are the salient points kindly contributed by Mitul Kotecha, MD & Head of Global Currency Strategy at Calyon. To view the full discussion, please click here to visit the original post on his website The Econometer

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