Intraday Market Thoughts

BoJ Downgrades Forecasts, Onto Eurozone PMIs

by Adam Button
Jan 24, 2012 8:39

The Bank of Japan maintained the status quo but forecast negative growth for the current fiscal year. Risk trades are slightly lower heading into the European session with JPY leading and AUD lagging. European newsflow will be heavy with the ongoing EcoFin meetings, European PMIs, UK public finances and several debt auctions as highlights. 14 new trades are posted from Monday night.

The BOJ lowered its forecast for the year ending in March to -0.4% from +0.3%. Along with the forecast, policymakers say they are expecting a pickup later in the year as exports rebound. For the following fiscal year, the forecast was lowered to 2.0% from 2.2%. Rates were held in a range from 0-0.10% and QE was left at 55 trillion yen.

In India, the central bank also held rates unchanged but lowered the reserve ratio by 50 basis points..

The euro will continue to be a slave to debt-swap rumors and reports in the upcoming session. EU finance ministers continue to meet in Brussels so there will be plenty of fodder. Journalists will be keep to dig up more information on a potential dual bailout scheme that includes both the ESM and EFSF.


Earlier his morning, German flash Jan services PMI beat expectations, coming out at 54.5 from Decembers 52.4, while flash manuf PMI regained 50.9 from 48.4. In France, flash Jan manuf PMI slipped to 48.5 from 48.9, but services rose to 51.7 from 50.3.

At 0900 GMT, the European manufacturing and services PMIs will be released. The manufacturing survey is expected at 47.3 versus 46.9 prior; services 49.0 vs 48.8 prior.At the same time, the Netherlands sells 2yr and 30yr debt.

At 0930 Spain will sell 3-month bills. Debt markets outside of Portugal have improved considerably in 2012 and the risks around this sale are minimal compared to last week. At the same time, UK public sector net borrowing expected 12.1B in Dec vs 15.2B in Nov. This numbers always present a risk for GBP but there may be a greater likelihood of gains due to the recent GBP underperformance.

Finally, at 1000 GMT, European industrial new orders are expected to fall 2.7%.

14 new premium trades are issued moments ago-- 3 EURUSD, 3 USDCAD, 2 AUDNZD, 2 S&P500 futures (ESH), 2 gold, 2 US crude) (CL_F) For direct access, please click here: Click here to subscribe:


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