More evidence of future possible policy easing in China and Japan

Once again the market’s obsession with everything eurozone kept the majors fairly range bound today as investors await tonight’s meeting of finance ministers. The dollar briefly lost some ground against the yen in the lead up to a slew of data releases out of Japan which added fuel to speculation the BoJ will ease further at its upcoming policy meeting. EURUSD started the session on the back foot, before finding some traction and pushing towards 1.2300. However, the euro found some stiff resistance around this level, which is not surprising given the lack of conviction in price action throughout the majors.

The big release of the session was Chinese inflation data, which has been an integral part of Beijing’s policy decisions in the past. However, the market is acutely aware that the Government has access to the data long before it is publicly released, thus the recent policy easing moves by Beijing provided an insight into what the figures may be, amongst other data which includes the fact that China is notorious for data leakage. Hence, the actual CPI and PPI figures were pretty much in line with consensus at +2.3% y/y and -2.0% y/y, respectively. Overall, this latest round of data provides more scope for easing and, accordingly, we think Beijing will be forced to ease numerous more times this year, including RRR and IR cuts. This is in line with comments from Premier Wen over the weekend where he stated that the government will intensify policy fine-tunning, but a lot will depend on Chinese GDP data released later this week.

The Chinese GDP data is one of the most talked about events this week outside of Europe, as it is likely to be the most influential factor when it comes to more policy easing from Beijing. Looking at the recent policy loosening in China and recent comments from officials, who may have already seen the figures, the GDP data may be less than current market expectations, presently around 7.7% for Q2. In fact, there are more than few who suggest the number may closer to the wrong side of 7%. Either way, the data will likely help pave the way for commodity based risk assets in the days following the announcement (such as commodity indices and currencies).

Elsewhere, Japanese machine orders fell by the largest amount in more than five years, sinking 14.8% m/m. Over the same period, Japan’s current account decreased to JPY215.1bn from JPY333.8bn. Whilst the data is not catastrophic it does add fuel to the global growth slowdown story and increases the likelihood the BoJ will expand its asset purchase program at its upcoming meeting, which we think it will.

The yen didn’t react significantly to the news. Instead, USDJPY was very jumpy in the lead up to the data, before settling around its opening price. The other major pairs traded broadly in line with commodities and major equity markets in Asia – sideways. Currently, the Nikkei 225 is down by around 1.00% and the ASX 200 is in the red by around 0.89%. Looking ahead, AUDUSD should find some support around 1.0176, and on the upside the pair is finding it fairly sticky around its 200hr SMA.

Источник: Forex.com

09.07.2012