ISSN: 2056-3736 (Online Version) | 2056-3728 (Print Version)


Reserve Bank of Australia Edwards in a WSJ/DJ interview •Would be more comfortable with AUD/USD at 0.65 •Australian dollar not reflecting weakness in commodity prices •Expects Fed to further delay hikes.

– AUD/NZD is currently trading at 1.0742 with a high of 1.0783 and a low of 1.0740. The Aussie is lower with the recent comments form RBA’s Edwards crossing the wires saying he would be more comfortable with the Aussie at 0.65. AUD/NZD had otherwise been drifting to the downside within the broader consolidation of the recent bull trend from last week’s lows of 1.0575. The Aussie has garnered some strength in the background of commodity prices recovering, within the ebbs and flows, and an improved risk apatite in markets, albeit on fragile foundations.

– Japan PM Abe: Important to raise wages to stimulate spending.

– $JPY, $CHF, and $EUR are expected to be the most active majors vs $USD with 1W implied volatility at 21.10, 15.52, and 15.32 respectively.

– Bank of Korea & Fin. Ministry: Concerned about increasing herd behavior in fx markets, To take all measures needed on heard behavior.

– BoJ Governor Kuroda: BoJ’s easing is aimed at achieving price target, BoJ will continues easing until it reaches 2% inflation. Negative rates put downward pressure on bond yields and will help boost Japan’s economy.

– Germany’s Merkel: Not easy for all to agree on deal for Cameron, Ready for ‘’Brexit’’ compromise “even if difficult”.

– EU President Tusk: “A lot still remains to be done” on UK talks. Says work still needs to be done on UK talks, “We must respect rules and laws” that EU adopted. Says we made “some progress” on UK talks. Says EU Leaders took “Few Steps Back” on UK.

– It would seem that several major markets have now reached something of an inflection point as oil reaches some key levels. The rally on oil that we saw yesterday came despite the suggestions from Iran that whilst it welcomed the production limits taken by other oil producing nations, it stopped short of joining in the limits. This is the obvious play to make from Iran, paying lip service to the agreement in Doha between Saudi Arabia, Qatar, Venezuela and Russia. However it is no game changer and perhaps after a day of looking past this fact the market may begin to realise this. The interesting feature is that the price is WTI has now reached its key 3 month downtrend, as have highly correlated markets such as the FTSE 100. Safe haven trades have taken a pause for breath for the time being and moving into today, markets are generally far more circumspect than they have been in recent weeks. This would suggest they are waiting for the next catalyst perhaps, with developments over OPEC still seemingly able to drive sentiment.

– A lack of positive price pressures is becoming an increasing threat to the credibility of the Federal Reserve. Some officials are now even calling for “direct evidence” of inflation moving back to the target 2% before the next rate hike can be administered. Even die-hard hawk James Bullard is now questioning the merits of further increases in interest rates in light of drooping inflation expectations. Meanwhile, hard data is likely to confirm that rising prices remained confined to the services side of the economy early on this year. Analysts are projecting the consumer price index to fall 0.1% in January… 2%, impossible in our lifetime without QE4?

– EIA US weekly oil inventory data report week ending 12 February 2016 • Prior -754k • Last night’s API inventories -3300k • Cushing +36k vs +500k exp. Prior 523k • Gasoline +3036k vs +400k exp. Prior +1258k • Distillate +1399k vs -1500k exp. Prior +1281k WTI loses around 65 cents after the data. We trade at 31.29 from 30.90 And that’s the problem with all this inventory data. Two reports with differing outcomes. In the time it’s taken me to grab a chart we’re back under 31 to 30.74.

– Japanese stocks fell, paring the best weekly advance in six years, after the yen strengthened against the dollar, denting the earnings outlook for exporters. The Topix index dropped 1.4 percent to 1,292.79 as of 9:22 a.m. in Tokyo. The measure is heading for a 8.1 percent gain since Feb. 12, when it closed at a 15-month low. The Nikkei 225 Stock Average lost 1.4 percent to 15,967.07 as the yen traded at 113.10 per dollar after jumping 0.8 percent Thursday. U.S. stocks fell following the strongest three-day rally in almost six months for the Standard & Poor’s 500 Index. “The stronger yen will be a burden on Japanese markets,” analysts say.