Fed On The Horizon
Risk assets gave back some of their recent gains on Tuesday ahead of a busy day of data releases. There were few developments on Greece, following the conclusion of Mondays monthly finance minister meeting, although the continued uncertainty is likely to keep investors cautious. USDJPY rallied in the US session, despite no change in stance from the BoJ’s policy meeting, nor any fundamental news hitting the wires. Wednesday’s trade data is likely to show Japan suffered the first trade deficit for many years, largely as a result of last years tsunami and one-off factors however. The true test for USDJPY will be today’s FOMC meeting where the Fed will unveil a new set of rate forecasts. Fed Chair Bernanke’s post-meeting press conference could also provide a surprise or two and we expect journalists to quiz him extensively on the possibility of further QE, perhaps even in combination with inflation targeting. We continue to view this rebound in risk appetite as a temporary respite in the middle of what is likely to be a prolonged Eurozone sovereign debt crisis. In a choppy session, EURUSD traded in a range 1.2953 – 1.30063, USDJPY 77.64-76.96. Australian CPI is due and our economists are below consensus looking for a quarterly decline of 0.2%, which would likely weigh on AUD. BoE minutes and Q4 GDP data are also due.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank