Talking Points<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
· JPY Current Account weaker confidence lower
· EUR Inflation data remains contained
· GBP claimant count lower but wage growth less than forecast
· USD TICS PPI on tap
Markets meandered most of the night as eco data in EZ offered little fresh perspective on inflation while traders in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Asia continued to be preoccupied with BoJ rate decision due tomorrow night. The only pair to show some trend action was GBPUSD where claimant counts once again beat expectations shrinking -5.5K versus -3.5K forecast. The news confirms that UK labor markets as well as wage growth remain robust and should provide strong support for UK economy going forward. With London now the epicenter of petro-dollar recycling and the de facto capital of the financial world, a long pound position has in effect become an implied bet on the health and vigor of global capital markets. And while the UK economy is certainly broader than hedge funds and stockbrokers, it is nevertheless highly leveraged to that sector. Therefore going forward, currency traders may well keep their eyes on the performance of the FT100 and the S&P 500 as well as the results from the usual UK economic releases for early clues to cable direction. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
In Japan, the market continues to await the BOJ decision, but this event has been so double and triple guessed that the actual news release may proved to be anti-climactic. There is a growing consensus amongst traders that the BoJ policy committee may have tried to prepare the market for a no-hike decision by leaking the news to Japanese media yesterday. In this case the post announcement reaction may be quite muted as most of the impact may have already been priced in. A rate hike on the other hand although it is still considered to be the majority forecast may actually be perceived as a positive surprise providing a boost to the yen. The carry trade has become the easiest trade in the market as USDJPY continues its one way trip higher. Yet, history tell us that markets rarely provide such generous riches to so many for long, so a correction in the pair could be due.
