Intraday Market Thoughts

Awaiting BOJ, Pre NFP Premium Insights

by Adam Button
Oct 5, 2012 1:38

The ECB avoided drama at the monthly meeting but Draghi reiterated a readiness to buy bonds if Spain asks for aid. The euro was the top performer while the US dollar lagged. Todays Bank of Japan is unlikely to deliver any policy changes but may set the stage for action at the end of the month. Latest Premium Insights for Thursday night are out. See link below.

The ECB meeting was refreshing because for the first time in months, expectations for action were low. On that front, Draghi delivered. The status quo remains; there was no discussion of rate cuts and growth risks remain to the downside.

The ECB shot down rumors that it would accept a maturity extension of Greek bonds but the euro continued higher anyway, lifting through 1.30 to 1.3130.

Economic news was mildly positive. Factory orders edged out extremely low expectations and initial jobless claims improved to 367K compared to the 370K consensus. The FOMC minutes noted significant downside risks to growth, including Europe, the fiscal cliff and slowing global growth. None of it was a surprise but the pessimistic outlook tempered risk trades including EUR/USD.

Overall sentiment was buoyant with the S&P 500 gaining 0.7% and the commodity currencies making strong gains ahead of non-farm payrolls on Friday.

The highlight of Asia-Pacific trading is the Bank of Japan decision, which will be delivered around 0345 GMT (there is no fixed time). The BOJ expanded its asset purchases last month and may do so again but the probability of action is minimal. The BOJ meets again on Oct 30 and will deliver its semi-annual forecasts then. The market thinking is that they will wait until the end of the month to act.

Citi notes that USD/JPY has risen following the past seven BOJ decisions.

Latest Premium Insights for Thursday night include EURUSD, cable, EURJPY, gold, silver and oil. Direct access is found here: Nonsubscribers can join here:



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