Equities steadied early NY helped by a decent Consumer Confidence number and some more good Earnings Reports following more fears of Chinese credit tightening overnight, which hit Equity Futures during the Asian and early Europe session. With the usual Dollar and Yen strength accompanying when the risk trade is off. 

S&P did lose its gains and more in the afternoon, Equities still do look weak as uncertainity about the issues that effected the market late last week persist: Bernanke's renomination, potential Chinese tightening measures and Obamas' planned Bank Trading regulations; tomorrow is FED day though.

UK GDP came in well below expection 0.1% vs 0.4%E .. the Pound had already lost considerably before the release, GBPYEN down almost 300pips, and really didnt give us anything to short and i certainity didnt feel conformable going long with the equity markets in their apparent precarious state, on top of that weak GDP number, even if GBPYEN was in its higher band of average daily ranges. Cautiously looking to short rises may be play on that pair until Equities do find some conviction.  

FOMC announce their latest interest decision. The market again expecting no change to the very low rate band. Main focus will be on wether or not the 'exceptionally low rates for extended period' rhetoric will be altered in anyway to a more hawkish stance. Personally i doubt it, but there has been a few Fed Heads coming out with slightly more hawkish tones of late, so we do have to be aware of that potential. If that were to occur, the Dollar should strengthen and Equity markets will most likely take a hit which would put a lot of pressure of the Yen crosses. The last couple FOMCs' seen the Dollar strengthen significantly post announcement, almost in spite of what the Fed had to say in that statement, and this could happen again.

We also have inflation data out of Germany, Sales data out of the UK, and more (likely ugly) housing data out of the States tomorrow.  

C.

We closed out last week with fear again sweeping the markets, Stocks taking heavy losses and closing near their lows. With risk firmly taking a back seat, we seen significant gains for the Yen and the Dollar against the higher yeilding currencies. The Dollar did however get sold some on the Obama Bank trading announcement, possibly on a fear of capital leaving the U.S in the light of it. 

That fear was fed by the new Chinese lending restrictions undermining the outlook for the global recovery and commodity demand. Softer German ZEW surveys and continued focus on the mess in Greece weighed on the Euro and broader risk appetite. Mixed Q4 earnings, then Obamas plans to limit Bank trading operations and the doubts over Bernankes' future just created a maelstrom of uncertainty that the market just did not like. 

We do have to be cautious here and I wont be rushing into any trades early this week. Of course the issues mentioned above havent magically disappeared over the weekend.. but considering Bernankes' non renomination isnt actually a reality yet, the details of Obamas' plans on Bank trading are as yet largely unknown and Chinas plans to cut lending is just to try to head of inflation exactly because its economy and its demand for commodities is growing so strongly! Maybe as some more information in these areas comes to light, the market can regain some composure and the latest round of panic should subside. I wont be betting my house on that happening early this week tho, and we may have to look at further downside on equities and correlated pressure on the Yen crosses and EURUSD until the market can find that something to build some composure upon. 

Tomorrows' highlights include U.S Existing Home Sales @ 1000 EST and German Consumer Confidence @ 0200, then Monetary Policy Statment out of Japan overnight. Kicking off a very busy and inevitably volatile week. 

Be careful out there! 

C.

The Chinese data did print hot overnight (4th QTR GDP +10.7%, higher consumer inflation of 2% and Retail Sales up 16.9%. HOT!). We did ultimately get much of a repeat of the yesterdays risk averse trade, with the Dollar and Yen winning out against the high yeilders for much of the day. Any chance of some kind of significant recovery killed off by Obamas' speech on wanting to introduce limits to Bank's trading. 

During the speech we seen the Dollar spike lower with the equities plunge, action which is at odds to the pattern we have been getting recently. I assume the market viewed the potiental new regulation as hurtful for the U.S economy and thus also the dollar, the yen being the big winner in the markets flee from risk following Obamas' comments.  S&P finished down 22 

points and the DOW dropped 213 points, its worst loss since Oct 09. (putting it in the red for the year.)

I really dont have much more to add to that, how long will the risk aversion continue? how serious will the market deem Obamas' plan's to reign in Bank trading practices? How much of an impact will Chinas' impending rate hike really have on the risk trade? I dont know. Market may have some stuff its needs to work out at this juncture before it can make its move back up.

Tomorrow is quiet on the scheduled data release, with only GBP Retail Sales personally noteworthy, of course that doesn't mean we wont see more volatility heading into the weekend. I will be looking to tighten up and limit my risk exposure as much as possible over the next few hours. 

Today was a big 'risk off' day. With the perceived decision by China to try to curb bank lending and control the pace of credit growth this year, amid rumours that they could raise the actual lending rate as soon as this week, stopping yesterdays late 'risk on' rally in it tracks during the Asian session. This spilled over to Europe and NY,  with crude getting hammered on lesser demand concerns and sparked a 'fear spike' (VIX up 10% today at one stage), all this helping the dollar and yen northward. With the Euro hampered by budgetery issues in Ireland, Portugal and Greece still polluting news flow.. coupled with the negative German PPI number this morning, the EURUSD and EURYEN just took a beating. They really didn't stand a chance.  

UK employment printed better than expected, and the Pound did weather the storm relatively well. These UK, Eurozone and Dollar themes we have seen throughout the last week or so, and i dont think they are going to go away anytime soon. 

Overnight we will get some significant data out of China (9pm E.S.T), GDP & Retail sales amongst others.. if these come in hot, the market may choose to remain spooked by the spectre of further fiscal tightening from the PBOC and we may get an action replay of todays events, overnight at least. It is possible the market has just been adjusting to the prospect these potential PBOC moves before the fact. Its a tough call that I don't really want to make. 

Markets have always ultimately proved resilient when we have seen these bouts of risk aversion and i really dont see that changing because of Chinas' foresight in trying to reign in its' economy from overheating. How long will this round of risk aversion last? I dont know, but I dont think the low yeilds from having your investments held up in 'safe havens' like the U.S and Japan will satisfy bolder investors for very long. 

Manufacturing data out of the Eurozone and the States amongst more corporate earnings data tomorrow. 

Good trading.

C.

Sorry for the lack of update the last couple of nights. 

Today the dollar made further gains during our 'risk off'  european session; Equities did make a strong recovery during NY (S&P finishing on close to 18 month highs), but the dollar held most of its gains, this could be a pretty telling signal and I think we may well see further dollar gains near term. I refered to this potential last Sunday as we seem to be seeing a pull back in dollar funded carry trades. Sentiment does appear to continue to be dollar bullish. 

Germany posted some horrible ZEW economic sentiment numbers, which aided the EURUSD sell-off. The U.K posted some strong inflationary numbers this morning falling in line with the pattern of stronger British data that we have seen recently and should continue to see (they do have a hell of a lot of room for improvement!). This all pushed EURGBP down to multi-week lows.

Yen crosses still bouncing around relatively range bound. There is a nice strong correlation again with equities which does make them easier to trade (this wasnt the case during long periods late last year). I hold my GBPYEN long @ 147,10 and think we could well see some further upside during tonights Asian session. 

On the data front tomorrow, we are choc-a-bloc, with inflation numbers out of the eurozone, which may well surprise to the downside, and later on, more inflation and housing data out of the U.S. From the U.K we have rate decision minutes and job data. We will also see a barrage of corporate earnings. All in all, quite busy and we should see a volatile day. 

C.

Not really much to add tonight, havent had much time to follow the market today. Aussie employment and Chinese House prices came in hot overnight helping push the yen lower  during late Asia and early Europe. However, U.S Retail Sales surprised pretty badly to the downside switching everything back to risk off and we seen the yen crosses give up the nights gains and more. Equities really didnt sell off much tho, and finished the session in the green.

ECB and Trichet was a bit of an non-event as expected. A few warnings for Greece. All a bit ho-hum. EURUSD is still stuck in a tight range around 1,4500 and seems directionless for now. X has wrote a little more on the EURO here 

Intel posted a good earnings report, after market, spiking the Yen lower again. We will have to wait and see if that will help keep equities buoyed overnight and tomorrow. Inflation and consumer sentiment numbers also come early in the NY session, maybe we will get some positive news flow that the market seems to be waiting for, following todays snoozefest. 

Personally, i still like the GBPYEN long and will just keep buying it on dips. Simple.  It is a Friday before a holiday on Monday though, so be careful out there. 

All the best.

C.

Equities moved right back up today, making up a lot of yesterdays losses, even with a dearth of any significant news flow. After a shaky start on Wall Street, the buyers were eager to get right back in following yesterdays sell off, bringing the yen crosses up nearer to the top of their recent ranges, with GBPYEN reaching my 149 target from 2 nights ago. This pattern has happened time and time again for almost a year now. You may not agree that we are on as solid an economic footing as Wall Street seems to think, but you cant argue with the bullish sentiment that still exists in the market. I believe we are primed to go higher, and we may get our catalyst with significant U.S data tomorrow and Friday. I will be holding my 147,10 GBPYEN long and look for a 150+ target for now. 

Just want to have a little word about Sterling, we had Manufacturing Production  printing a little better than expectation this morning with some hawkish words from the BOE: 'UK may have to raise rates this year and that the Bank should not increase its QE programme' - Sentance; which helped make Sterling a big winner today. I believe the pound strength will persist, the data should continue to surprise to the upside (they have pumped enough stimulus into the economy) and the market should like the seemingly inevitable new Conservative government come election time in May. So, with that in mind, I will favour POUNDYEN longs over EUROYEN longs, this Greece thing just isn't going to go away and with potential issues in Portugal, Ireland and Spain to come out which should continue to weigh on the Euro. 

The EUROUSD again failed at resistance today even with the decent swing back on equities. To be honest, I really haven't a clue where the dollar wants to go, either does the market it seems! If we do see some positive U.S data tomorrow and Friday, it will be telling to see if we do get another bout of dollar strength.

U.S Retail sales, Unemployment claims and Import prices along with the ECB rate decision means we should see a fun and volatile day tomorrow. 

c.