Asian markets remained in a holiday mood overnight and FX flows were extremely light. News flow too was thin and Japanese economic data was second-tier and not market-moving. USDCNY fixed at a new low, but the adjustment on the previous fixing was minor, and the headline failed to attract much attention. EURUSD traded 1.3043-1.3077 and USDJPY 77.90-78.03. Continue reading →

The Wall Street Journal reports that the Fed is reconsidering the policy rate guidance it provided in August – when it signalled that rates would likely stay at zero until mid-2013 Continue reading →

The EUR has managed to avoid further losses during the Asia session but it is clear that it will take more than a blast of liquidity by the ECB to change the overall picture for the currency. In addition, even if the funds do succeed in preventing massive deleveraging by banks and protect financial stability, the perceived debasement of the currency, albeit temporary, means the euro will need to continue declining on a structural basis. Continue reading →

The Bank of Japan left policy entirely unchanged at its meeting overnight, as widely expected. Market focus is now fixed squarely on Europe again as the ECB gears up for the first of two three-year LTROs. Continue reading →

The Eurozone’s finance ministers’ conference call managed to secure fresh resources for the IMF, though again there was a distinct lack of unanimity. Only four non-Eurozone nations agreed to participate. It had been hoped that the fund’s resources could be boosted to EUR200 bn but instead only EUR150 bn was pledged. Continue reading →

North Korean media announced that leader Kim Jong-il died over the weekend, sending USDJPY briefly higher. Officials from Japan and the Republic of Korea stressed that both countries remain on their guard, although the yen recovered when fears of an immediate military reaction receded. Although Kim Jong-il had already picked his third son Kim Jong-un as the next head of state, a smooth leadership transition is by no means guaranteed, and we remain cautious on the yen in the immediate future given the headline risk. Continue reading →

The EUR has traded back above 1.30 amid tight ranges as activity winds down towards the holiday season. Nonetheless there still wasn’t much reason to be cheerful – IMF Chairman Lagarde said that the global economic outlook is gloomy, and no region and country is immune. She said that all countries must take action to improve growth. Continue reading →

ECB member Knot said he expects European leaders will solve the debt crisis as long as the financial rescue fund is increased, Reuters reports, citing a magazine. He added that the Eurozone rescue fund or contribution to the IMF has to be at least EUR1 trn Continue reading →

The euro’s slide south continued overnight amid fresh doubts over the summit’s results and implementation strategy. While a headline that the German Chancellor was ruling out raising the upper limits of ESM funding (according to coalition sources) led to some selling, the move was largely option barrier and stop-loss related initially. Continue reading →

EURUSD continued its post-summit slide as the market has reverted to the conclusion that not enough has been done. Although some stability measures for financial markets have been welcome, the summit agreements themselves raise plenty of new questions, to which the market is not convinced that the answers would be favourable, such as the ratification process and the relevant democratic mandates by individual EU governments. Continue reading →

The euro did not manage to sustain its Friday strength but at this stage the Eurozone’s leaders would probably be content that the market is not selling off en masse and this week’s bond supply can simply pass without incident. There were no major developments over the weekend, though financing for the IMF appears to be taking shape with major central banks in Europe ready to increase their commitments, though as ECB President Draghi warned last week, the legalities still need to be resolved. Continue reading →