Intraday Market Thoughts

BoJ Raises CPI Target, ZEW Above Expectations, onto Draghi

by Patrik Urban
Jan 22, 2013 12:45

New easing from BOJ to start next year, higher CPI target; Rumors of Weidman resigning false; German and EZ ZEW indicies soar; British public sector net borrowing lower and CBI orders expectations fall. Canadian retail sales, US existing home sales and Draghi are next. Status on last Wednesday's Premium Insights: 8 trades hit all targets, 5 were unfilled, 5 remain in progress. 1 of 2 EURUSD longs hit all targets, the other in progress; 2 of 2 GBPUSD shorts hit all targets 2 of 2 USDJPY longs hit all targets 2 of 2 AUDUSD longs in progress 1 of 2 CADJPY hit all targets, the other missed the fill (89.10) by 18 pips 2 of 2 EURJPY longs unfilled 2 of 2 EURGBP longs unfilled (1st missed fill (0.8290) by 9 pips 1 of 2 Gold longs hit all targets, the other in progress (missed final target by 3 pips) 1 of 2 Silver longs hit all targets, the other in progress (missed final by 0.29) 1 of 1 Crude longs unfilled (missed entry by 0.30)

USDJPY initially rose to 90.12 but then fell sharply lower after the BOJ announced a new open ended easing program. Markets were a bit disappointed as asset purchases in the amount of JPY 13 trillion per month will begin only after the completion of the current easing program, in January 2014. In line with expectations, the BOJ increased the CPI target from 1% to 2% and kept the overnight rate below 0.1%. USDJPY fell to 88.35 and now trades around 88.65 while EURJPY trades around 118.35.

EURUSD saw a nasty whipsaw as it initially rose to 1.3365, then fell sharply lower to 1.3266 on rumors of a Bundesbank president Weidman resigning. Within and hour the rumor proved to be false and the pair moved back to 1.3360 also underpinned by German ZEW economic sentiment index that surprised to the upside as it soared in January to 31.5 from previous 6.9. This is the best result since mid 2010. The Eurozone equivalent also improved significantly to 31.2 from 7.6. Ashraf previewed the ZEW in detail in yesterday's IMT.

British public sector net borrowing declined to GBP 13.2 bln in December after November's GBP 14.3 bln and industrial orders expectations worsened in January to –20 from prior –12. GBPUSD trades higher around 1.5865 and EURGBP is a bit weaker around 0.8410.

The US session begins at 8:30 am ET with Canadian retail sales that are expected to be flat in November after a prior growth 0.7%. Core sales are seen at 0.1% from 0.5%. US reports will be limited to existing home sales at 10:00 am that are anticipated to rise in December to 5.09M from previous 5.04M.

Traders are also awaiting the ECB president Draghi's speech in Frankfurt, which begins at 1:00 pm.

Act Exp Prev GMT
Consumer Price Index (Q4) (q/q)
0.4% 1.4% Jan 23 0:30
RBA trimmed mean CPI (Q4) (q/q)
0.7% 0.7% Jan 23 0:30
Consumer Price Index (Q4) (y/y)
2.4% 2.0% Jan 23 0:30
RBA trimmed mean CPI (Q4) (y/y)
2.4% 2.4% Jan 23 0:30
Public Sector Net Borrowing (DEC)
£13.208B £13.000B £14.266B Jan 22 9:30
Retail Sales (NOV) (m/m)
0.0% 0.7% Jan 22 13:30
Retail Sales ex Autos (NOV) (m/m)
0.1% 0.5% Jan 22 13:30
Existing Home Sales (DEC) (m/m)
5.10M 5.04M Jan 22 15:00
Existing Home Sales Change (DEC) (m/m)
1.2% 5.9% Jan 22 15:00
ZEW Survey - Economic Sentiment (JAN)
31.2 14.1 7.6 Jan 22 10:00
ZEW Survey - Economic Sentiment (JAN)
31.5 12.0 6.9 Jan 22 10:00
David Cameron speech
Jan 23
ECB President Draghi's Speech
Jan 22 18:00

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