More focus at the FOMC and bailout packages.
MAJOR HEADLINES – PREVIOUS SESSION
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AU Australia Q4 CPI at -0.3% q/q vs -0.4% f/c and +1.2% prior
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AU Treasurer Swan says infl pressures easing more broadly
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AU Treasurer swan says more room to move on fiscal and monetary policy
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US Senate Finance Committee approves approx USD522 bln tax, spending stimulus package
THEMES TO WATCH – UPCOMING SESSION
Events Today:
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Germany Prelim CPI (Jan) (time not set)
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Germany GFK Consumer Confidence (0700)
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France Consumer Confidence Index (0745)
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Italy Business Confidence Index (0830)
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Sweden Retail sales (Dec)(0830)
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US MBA Mortgage Applications (1200)
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Canada Employment Earnings (1330)
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US FOMC announcement (1915)
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NZ RBNZ rate announcement (2000)
Market Comment:
News headlines in Asia were dominated by US stimulus packages and the amounts involved. First off we had news that the US Senate had approved USD522 bln package of tax breaks and spending aimed at kick-starting the economy and this will be combined with a USD365.5 bln spending package passed by the Senate Appropriations Committee and will be presented to the full Senate in coming days. The package was then nicely rounded up to a headline grabbing (near) USD900 bln when reported in the WSJ. The result was that Asian bourses were given a leg-up and risk appetite was again a feature of FX markets.
In addition, Asian media carried stories that the new US “bad bank” plan would likely become a reality early next week. Markets took this positively, arguing that bank balance sheets would become stronger and ring-fenced, but there still remains the uncertainty of how the bad bank would pay for acquired assets.
Jobs, or the lack of them, were again in the news with latest analysis from the US Labour Department showing that unemployment rates rose in all states during Dec, with rates in Michigan and Rhode Island rising above 10% and four others at 9%+. On the other side of the globe, a recent survey of Japan manufacturers showed that they expect to cut about 400,000 contract workers in the six months to the end of March. The numbers involved are more serious than the government’s December estimate that 85,000 such workers would lose their jobs over the same period.
Interest rate meetings are again in focus, with the FOMC policy announcement due later today(1915GMT). With rates where they are, and nowhere to go, attention will be switched to other policy initiatives accompanying the expected unchanged rate decision. Markets are looking for further news on the Fed’s view on purchasing longer-dated Treasuries after last month’s announcement referred to “evaluating the potential benefits of purchasing longer-term Treasury securities”.
Meanwhile, William Dudley will take over the reins of the NY Fed after Timothy Geithner moved across to the US Treasury. He will automatically become vice-chairman of the FOMC and a voting member, but this is of little consequence at this meeting.
One central bank that has further room to move on interest rates is the RBNZ, and tomorrow’s early meeting announcement is expected to produce a 100bp cut in rates, with growing talk of an even bigger cut of 150bp doing the rounds. The bearish environment for the NZ economy, following Fin Min English’s downbeat assessment of the outlook yesterday and the previously released NZIER quarterly business survey, was asserted after Fonterra announced a further 15% reduction in the projected payout for NZ dairy farmers over 2008/09.
That announcement is expected at 2000GMT.
CHART: EURUSD
Uptrend channel from Friday low looks like it may provide the trading parameters for the next few sessions. Looking to trade between 1.3400-1.3185.
