Fed Will Wait-and-See, China PMI on Deck
The FOMC minutes summed up Bernanke's testimony; more progress is needed in the economy before QE is slowed. The US dollar was the best performer Wednesday while commodity currencies sank. Data from China is in the spotlight with the HSBC China PMI. 2 new EURUSD & 2 new EURJPY have been issued after 4 trades hit all targets, including both EURUSD longs, while EURGBP were stopped out. Access to the latest trades is seen in the latest Premium Insights.
Dollar bears attempted to sell the currency after Bernanke warned against premature tightening but they were quickly stifled and the dollar soared. The price action underlined a point we have made previously – no matter what the news, the US dollar is finding a way to rally.
Some market watchers pointed to a later comment from Bernanke, that the Fed “could scale down purchases within next few FOMC meetings if labor market improvement was sustained” as a tapering signal. We think that's a stretch; Bernanke also mentioned increasing the pace of purchases.
The subtext in recent Fed commentary has been worry about the drag from the sequester. They believe it's only beginning to hit the real economy and will be a headwind. Unless the US can repeatedly generate strong jobs growth or fiscal strings are loosened, it's difficult to imagine the Bernanke Fed tapering in 2013.
A fresh risk to FX is the US stock market, which traced out a bearish reversal Wednesday. One interesting aspect of the S&P 500 decline was that it occurred immediately after the yield on the S&P 500 fell below the yield on the 10-year Treasury note. There is some suspicion that program selling following the crossover caused the turnaround in stocks but in the past relative yields between stocks and bonds haven't had a strong correlation with stock market performance. If it was a program, the loss will likely be erased in short order.
The US has no longer any case to criticize Beijing over an undervalued yuan because the yuan has in fact hit new highs vs the USD and even the IMF acknowledged that yuan is no longer undervalued.
As for JPY, the US has cannot criticize the Bank of Japan for doing exactly what the Fed is doing.
As my Premium subscribers were told on Friday,Japan will make a few statements ahead of G20 meeting indicating that it is closely watching current movements in order to avoid G20 from criticizing Tokyo over yen weakness.
Such remarks will lift the yen a bit and bring all yen crosses down to an attractive territory to buy them anew.
All the levels are in the latest Premium Insights
Ashraf
Regarding the JPY I would like to give yoru imputs in spot of last U.S. Treasury report notes in the hereudner link http://uk.reuters.com/article/2013/04/12/uk-usa-treasury-currency-idUKBRE93B12C20130412
is JPY wills sustain for another billions for supporting Yen down .. and is it kind of balancing (Deflation/inflation)or it is matter of trade balance??
moreover, Is Yuan an mirror of Yen policy ?
Congrats on the trade. Great stuff
Ashraf
the deadlock of OTC markets will trigger or it will be triggered by a factor inherent to a risk factor due to imbalances in payment.
we have years to come of growth from EEM.
korean won end second semester 1240
I have longed UJ from 79.5 and still hold this position. I think this trend will be stalled at 85.5 level in short term. . But from monthly chart, I think a sHs bottom pattern has formed, and it will get to 95 level in sereval years. From fundermental view, I think this is the top of Yen, and a new era has emerged.