By: Alex Brandt
European stocks look likely to open lower this morning.
Reports of central bank buying interest lined up at 1.4040 down to 1.4000. Stops below 1.4030 with option protection at 1.4000 and more stops below. Good bids again at 1.3970 and stops below 1.3950 on the EUR/USD. The higher CPI data from Australia helped propel the AUD/USD to a high of .9045, majority of retail traders are already long on this pair.
Traders are now expecting the RBA to increase interest rate to 4% next month, given that the inflationary data is in line with the RBA tolerance level, it will be interesting to see if they do. A rise in the interest rate should fuel the carry trade. The MD of Pimco says the safest choices for bonds are Canada, Australia, the Scandinavian countries plus Germany and Holland.
The PIGS are to be avoided as are the US, UK, France and Japan. He also sees much better investment conditions in the emerging powers like India, China and Brazil. He saves some particularly savage words for UK gilts, which are nesting on a “bed of nitroglycerin” and are a ‘must avoid’. China's ICBC (Industrial and Commercial Bank of China) has said that the lending surge has eased in last 10 days, any more news about China reining in stimulus will boost the dollar. Ben Bernanke is set to be confirmed on Thursday for another term as the chairman for the US Federal Reserve, after much uncertainty for the past week. Fridays US GDP report is this weeks last major news event, I believe that market expectations are a little high, and that the report will disappoint. Considering that yesterdays GDP report for the UK failed to met market expectations and that US economic data for December has been extremely weak.
Highlights:
AUD/USD - CPI higher then expectations
USD/JPY - Trade balance +545 billion Yen
Euro Zone Upcoming Economic Reports
Euro zone CPI for January expected -0.3% m/m, +1.0% y/y; EU harmonized -0.4% m/m, +1.0% y/y
07:45 GMT: French consumer confidence indicator for January expected unchanged at 31
09:00 GMT: Italian trade non EU for December
Forex Asian Session Recap January 27th
DailyForex.com