OctaFX | OctaFX Forex Broker
Open trading account
Back

Fundamental Afternoon Wrap: JPY tops focus this afternoon

FXstreet.com (Barcelona) - This afternoons institutional research has a narrower and more retrospective focus, most probably due to the quiet calendar and lack of upcoming "scheduled" risk events. JPY is is main focus, but an eye is being kept on the simmering Portuguese situation too.

JPY

The BAML Global Economics Team note that the BoJ broke a pattern of reactive policymaking, adding to the list of unprecedented monetary policy moves seen across the world. They feel that the benefits of global policy easing outweigh the costs at this stage, and they expect further follow-through from the Fed and the BoJ well into 2014. BBH analysts note that despite other Asia stocks declining, Japanese stocks have continued to rally as the yen has weakened. Looking to the BoJ, they note the bank's decision last week to create bank reserves at an unprecedented rate. They write. “It seeks to do in two years what took the Federal Reserve five years to achieve. The scale of its monthly operations will be roughly twice the Fed's. Under Shirakawa, the BOJ's balance sheet was roughly 21% of GDP. The current plan is to bring to it about 40% by the end of 2014.” They comment that some observers are suggesting that the BoJ action is a new strike in the currency wars

EUR

The BAML Global Economics Team believe that the ECB is sending mixed messages. They write, “The ECB's Mario Draghi signalled the ECB could change its rate stance over the next month(s), and is mulling over credit support, but within its mandate, which seems to exclude asset purchases.” BBH analysts note that Portuguese stocks and bonds are underperforming, where losses are being led by financials. Sebastien Galy of Societe Generale notes that the wave of investment from Japanese investors seems largely gone by if price action is any guide. He writes, “What may be continuing is JPY replacing EUR as a funding currency creating a short covering that boosts the EUR.”

US

The BAML Global Economics Team believe that politicians, not technocrats are deserving for the blame for the US´s economic woes. They write, “Many analysts argue that the recession of 2008-9 distorted seasonal adjustment factors, creating "hot" winters and "cool" summers. However, we believe this "echo effect" is small and fading. If the economy slows this spring-as we expect-blame politicians, not technocrats.”

Forex Flash: Could JPY revert to worlds key funding currency? – UBS

The BoJ's role in monetary easing cannot be understated. As it will be the main source of liquidity provision (OMT pending) when/if the Fed steps back, the JPY could even revert to the status of the world's key funding currency. According to Research Analyst Gareth Berry at UBS, “This could happen in two forms: firstly, Japanese investment flows would once again head overseas in size - shifts global markets are already heavily anticipating.”
Read more Previous

Commodities Brief – Precious metals bounce during US trading, crude holds above 93.00

Gold prices have been trading sideways, mitigating the fall that had roiled the precious metal during last weeks bloodletting. This week has gotten off to a different start entirely however, as losses were contained in the 1574 region, where a subsequent minor bounce has the yellow metal trading at USD $1575.42 per oz. during US trading Monday. In terms of the technicals, the RSI and MACD are illustrating a strong bullish divergence – this could lead to a modest bounce in the short-term and for this week.
Read more Next
Start livechat