10:00 GMT (Global-View.com) Aug 23, 2010 The focus over this past weekend has been on the election in Australia, which has ended with a hung Parliament. It might be another week before a new government has been formed. The ruling Australian Labor Party (ALP) by any measure has suffered a major setback. Some wonder if the election results might have implications beyond Australia in terms of political trends. Financial austerity seems to be the political trend everywhere. No major data are due from the U.S. today, but key releases are due over the week. Flash EZ PMI data out today were modestly weaker than expected.
The USDJPY is holding above the key 85.00 level. PM Kan and BOJ Governor Shirakawa held their planned again meeting today. It was 15 minutes and by phone. This was a disappointment for those who had been hoping for more. Presumably the government did not want to raise any issues about impacting the independence of the central bank. Nevertheless, the pressure on the central bank to support the economy and contain the JPY is clearly intense. Shirakawa will be meeting with the Japanese Finance minister later this week.
UPCOMING DATA HIGHLIGHTS: In North America, no major data are slated.
The EURUSD is steady on the day and the GBPUSD is unchanged. The EURGBP cross is stable. Traders still watch the European sovereign debt situation.
In the GBP, the U.K. new government is politically vulnerable.
The USDCHF is unchanged and EURCHF is lower. The SNB strong stand in supporting the EUR against the CHF has waned after massive FX losses.. Flows out of the EUR into the CHF remain an issue for the SNB. The SNB announced that 1H10 forex losses fell to CHF 2.8bln from CHF 4.0bln in 1Q10.
The USDJPY is lower and the EURJPY cross is weaker. While Japanese public finances are a mess, analysts point out that most JGBs are owned by Japanese, so Japan is not dependent on foreign investment. The government has been pressed the BOJ to promote growth and favors a lower exchange rate.
Some traders focus intently on the Japan vs. U.S. 2-yr note spread (only the U.S. 2-yr moves much).
The risk trade continues to be turned on and off almost daily. As for the commodity currencies (CAD, AUD and NZD), they are mixed vs. the USD. The Bank of Canada recently has been sending mixed policy signals. A strong CAD eases the pressure on the Bank of Canada to tighten. In Australia, the RBA is unlikely to tighten in September. Election results were inconclusive. The RBNZ is now in a reduced tightening mode. Oil and gold are mixed. Gold is still favored as a refuge from paper money.
EQUITIES & INTEREST RATES
Equities and Bonds are also risk trades. Far East equities closed lower. European bourses are down. U.S. equities are up. The U.S. 10-yr was last 2.61%, -1 bps.
Bonds are a counter to risk trades because risk investments must be financed. When the cost of money moves up (higher interest rates), the return and allure of risk trades such as equities falls.
See ECONOMIC CALENDAR for a complete list of future forex market events and consensus data estimates. Go to the forex forum for up-to-date market developments and technical trading ideas.
John M. Bland is an author and co-founder and partner of Global-View.com. Prior to Global-View.com, he was a forex trader and a private-label forex analyst for a top Fed watching service in NYC. He has been a corporate forex advisor and also worked in international liability management for a major N.Y. money center bank. John holds an MBA from the University of California at Berkeley and a B.A. in International Economics from that school.
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