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Forex Flash: Chinese inflation falls to 2% - Nomura

Nomura economist Zhiwei Zhang notes that CPI inflation dropped to 2% in January from 2.5% in December, in line with consensus forecasts.

He believes that the decline was due to base effect and on a month-on-month basis, food prices rose by 0.4% and non-food prices were flat. PPI inflation increased to -1.6% from -1.9%. He believes that CPI inflation will rise in February to 3% due to a base effect and holiday demand. He writes, “As trade data remained strong in January, we believe the government will focus more on inflation concerns and less on stimulating growth, and therefore we do not expect the People's Bank of China to cut interest rates or the reserve requirement in 2013.” Government leaders will likely discuss the policy stance after the National People's Congress in March. He continue to expect policies on shadow banking activities to tighten in H1 and the government to hike interest rates twice in H2. GDP growth should remain strong in H1 at 8.1%, but he then expect it to slow quickly to 7.3% in H2 from policy tightening.

Forex: NZD/USD establishing fresh highs at 0.8370

The NSD/USD has risen Friday after an upbeat overnight session saw the pair ascend off of its daily lows at 0.8325 without ever looking back. Indeed at the time of writing the cross has jumped a steady +0.41% during European trading, placing the exchange in the region of 0.8366/69, establishing fresh session highs.
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Forex: EUR/JPY knocked out on issues for Japan PM Abe

Investors priced in strong expectations of an aggressive stance, both fiscal and monetary, in Japan as Shinzo Abe convinced the people to vote for him. As his plans were increasingly known, the JPY eased further, coming to a new EUR/JPY high after BoJ's Shirakawa early leave, at 127.70.
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