Japan’s Unemployment & Inflation Report

Unemployment came in higher than expected and is the norm the market has had no reaction to this report.

• Jobless Rate – Survey:4.5%   Actual:4.6%   Prior:4.6%
• Job-to-App Ratio – Survey:0.72   Actual:0.73   Prior:0.71
• Household Spending – Survey:-0.9%   Actual:-2.3%   Prior:0.5%

Deflation persisted in January, however the  CPI came in less deflationary than expected.

• National CPI (YoY) – Survey:-0.1%   Actual:0.1%   Prior:-0.2%
• National CPI ex Food/Energy (YoY) – Survey:-1.1%   Actual:0.9%   Prior:-1.1%

ECB Lending higher than expectations. US GDP, Bernanke and Feds Beige Book awaited.

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A total of 800 banks will receive a total of 529.5 billion euros ($712 billion) in the latest round of 3 year lending by the ECB.  This was higher than the previous 489 billion Euros (523 banks participated last time).  The total was higher than the 470 billion expected. The funds are which are intended to spur on lending has mainly led to a decline in yields of sovereign debt as banks take look to recapitalize their balance sheets with carry profits.  It has also averted a liquidity or credit crunch in the EU. Whether it encourages lending is still open for debate.  The results (which were released at 5:25 AM ET) led initially to a rally in the EURUSD. When the underside of old trendline resistance held, the price rotated to new lows for the day.  The EURUSD is starting NY near the middle of the post announcement range (at 1.3450) and will battle between the upside resistance and on the downside the 100 hour MA which comes in at the 1.3413 level (low reached 1.34215).  It is month end so, there could be unusual flows that cause choppy trading conditions so be aware.   In other EU news overnight, Germany Unemployment Change held steady MoM (0K vs -5K) and the Unemployment rate rose to 6.8% from an expected 6.7%.  EU CPI Estimate came in a touch lower at 2.6% (vs est of 2.7%).  The next 3months a total of 2.4% of MoM gains from last year will roll off (0.4%, 1.4% and 0.6%).  The net effect on the YoY inflation will be of interest to the mkt & the ECB.  Should economic activity slow more than expected it could give the ECB a reason to ease further (currently 1% target). Finland and the the Netherlands approved the Greek bailout.  In the UK Mortgage approvals increased to 58.7k (est 54K).  Swiss CPI fell by a greater than expected -0.7%  (-0.3% exp).  The EURCHF barely moved/the USDCHF moved higher but has since come back down. NZ building permits increased by 8.3% MoM which was much higher than the 3.4% expected. The news sent the NZDUSD to it’s highest level since Sep 1 2011.  It also pushed the pair above its month long Non trending range. The old high of 0.8426 will now be support for the pair.  Today US GDP will be released at 8:30 AM with the second cut of the data coming in unchanged at 2.8%. Consumption is expected to decline slightly to 1.9% from 2%. US Chicago PMI (10 AM) is est to show a rise to 61 from 60.2.  The Feds Bernanke testifies in Washington at 10 AM and the Fed’s Beige book will be released at 2 PM

EURUSD falls on lack of G20 help. JPY moves higher bucking the dollars strength today.

The US dollar falls on better German data, but lower GDP estimates are a reminder of the risks

The US dollar is down against all the major currencies as better data out of Germany pushed flows into the risk currency pairs. The German IFO Business Climate index came in at 109.6 versus expectations of 108.8.  This was the highest level since July 2011.  Movement toward a Greek solution and overall better tone in the debt markets of the EU from the ECB’s Long Term Refinancing Operation (LTRO) calmed fears.  The second tranche of the LTRO will be made available next week with demand once again expected to be strong.  Germany’s IFO also published the Current Assessment and Expectations indices which were also better than expectations.  Current Assessment rose to 117.5 vs expectations of 116.5 and the Expectations Index advanced to 102.3 vs. 102.0 expectations.   Although the business climate might be better this month, the EU Commission signalled the expectations for a shrinking EU economy in 2012.  The report shows that they expect the EU combined economies will contract by 0.3% for the year which was lower than the November forecast for 0.5% gain.  Although the Commission expects the German economy and French economies to grow by 0.6% (down from 0.8% in November) and 0.4% (was 0.6%) respectively, they are looking for a -1.3% decline in Italy, a -1% decline in Spain, a -4.4% decline in Greece (was projected as a 2.8% decline in November) and a -3.3% estimated decline in Portugal (was -3% previously).  The declines do not bode well for deficit reduction targets especially for the troubled nations of Greece, Portugal, and Spain.  Raising an eyebrow is the projections in the budget for Greece out to 2020 which are estimating a 2.6% gain in GDP over that period. This rosy outlook was needed to help lower the Debt to GDP ratio to the desired 120.5% target.   The GDP projections for Greece in 2012 highlight the risks inherent in the projections for deficit reductions for the nation.  In the US Initial Claims will be released at 8:30 with expectations for a rise to 355K from 348K last wk.

GBPUSD falls to 100 day MA and Fibo Retracement support. USDJPY breaks above 80.00

The FXDD Morning Review

The USDJPY has continued it’s trend move higher eclipsing the 80.00 level for the first time since October 31st 2011 – the day of the BOJ intervention. The price also moved above the high on that day at the 80.23 level.  The 50% retracement of the move down from the April 2011 high to the low reached on the same October 31st intervention day, comes in at 80.535 and is the next target for the pair today.  The Yen has been weakening on the back of better US data and the surprise 10 trillion dollar QE stimulus announced at their last policy meeting.  The move has also been supported by favorable technical which have pushed the price above the 100 and 200 day MA, and key  longer term trendlines.   In the UK today, the minutes of the BOE showed that two members voted for increasing the QE above the 50 billion decided. The dovish comments sent the GBPUSD down to the 100 day MA and 50% retracement level at the 1.5693-98 level.  A break of this level should solicit additional selling in the market today.  In the EU PMI data came out weaker than expectations with the EU composite index falling back below the 50 level (49.7 vs 50.5 expectations).  EU Industrial Orders were higher however at the +1.9% vs +0.5 expectations.  The HSBC Flash Manufacturing Index for China came in a touch better at the 49.7 vs 48.8 last month and Australia Leading Indicators from Westpac came in at +0.5%. Despite the better data, the AUDUSD is down on the day.  The pair fell and closed below trendline support yesterday and is showing signs of topping.   In the US today, Existing Home sales are expected to rise to 4.66 million versus 4.61 million last month. The high for 2011 was a  4.64 million pace.  The months supply in December was 6.2 months. The trend is favorable in housing. The market will be watching to see if it continues today. In Canada,

EU bailout new dominates the overnight activity.

EURUSD up on Greece Optimism. PBOC lower reserve requirement. Japan record trade deficit