Good morning,

‐ It’s been a busy day so far for central bankers, especially in Japan and the US. As we noted on Monday, the yen has seen massive safe haven / carry trade unwinding flows over the last two weeks, and as a result, USD/JPY is now falling for its 7th consecutive day to a new 15‐month low under the 115.00 level. Unfortunately for the Bank of Japan, the last thing the Japanese economy needs is a strengthening currency driving down inflation and exports further. Things have gotten so bad for the BOJ that some traders are speculating that the central bank will soon intervene in the market by selling yen in an effort to push down the value of the Japanese currency. Its a Japan holiday. There is no 'news' • Just more selling • Under 113, to its lowest since November of 2014 • Continuation. • But I'm sure someone will come up with a narrative, if you're really after one. Also ‐ AUD, NZD, Gold, EUR, GBP ... all higher against the USD.

‐ Riksbank cut rate to ‐0.50% vs ‐0.35% prior. The economy continues to strengthen but inflation is expected to be lower during 2016 than previously forecast. The period of low inflation will therefore be longer. This increases the risk of weakening confidence in the inflation target and of inflation not rising towards the target as expected. To provide support for inflation so that it rises and stabilises around 2 per cent in 2017, the Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.15 percentage points to −0.50 per cent

‐US Dollar May Find a Lifeline on Day Two of #Yellen Testimony .

‐ AUD/USD’s upside bias lost momentum near 0.7150 and the prices retreated sharply over the last few hours as the US oil heads towards mufti‐year lows, while gold reversed $ 10 from multi‐month tops. AUD/USD tracks commodities lower Currently, the AUD/USD pair trades ‐0.06% lower near fresh session lows of 0.7087, reversing from daily highs reached at 0.7151 in early Asia. The Aussie ran through fresh offers near the mid‐point of 0.71 handle and gave up more than 50‐pips over the last hours as oil prices resumed their rout, with the US oil sliding nearly ‐2.50% below $ 27 mark as oil storage levels sit near all‐time high.

‐Top/worst performers in majors vs USD today: JPY 0.5%, CHF 0.1%, GBP 0.1%. CAD ‐0.2%, NZD ‐0.2%, AUD 0.0%.

‐OIS rates suggest markets are pricing in at least one 25bps rate cut from the RBA and the RBNZ over the coming 12 months.

‐With algos not exactly enthralled by their initial several million reads of the key soundbites in the Yellen speech, they ‐ along with carbon‐based traders ‐ are looking for guidance elsewhere. One place they traditionally go to is Fed mouthpiece Jon Hilsenrath, who unfortunately appears to be out of the loop lately, and the best he could do was underscore what the market already noted. Specifically, Hilsy highlights Yellen's concerns that "financial conditions have become less supportive of economic growth, stresses in China and other foreign economies could weigh further on the U.S., and market expectations for inflation are sinking" and added that "without explicitly pointing to the prospect of delayed rate increases, her recitation of these risks gave her comments a downbeat undertone."Which brings us to the only question that matters today: is a "downbeat undertone", aka bad news, good news for stocks once again, and will the market relapse to its old "bad news is great news" regime, or will it take advantage of today's brief European bank euphoria to sell the rally as it has throughout all of 2016?

‐The Chinese are on a massive gold shopping spree. China's government doesn't share exact figures, but the vast majority of gold heading into mainland China passes through Hong Kong, which does make its records public. Gold imports to China have surged over 700% since 2010, according to the latest data from Hong Kong. Exactly what China is doing with all that gold remains somewhat of a mystery. The increasingly wealthy Chinese are buying, but that doesn't explain all the jump in demand. The government says its gold reserves have grown only a little in recent years. Experts question whether China is telling the whole truth.

‐ Riksbank cut rate to ‐0.50% versus ‐0.35% prior.

Major news for today: RBA Gov Stevens Speaks, USD Unemployment Claims, Fed Chair Yellen Testifies.

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