TDLR - FX/IR/Metals & Econ Data Notes

TDL Research is off to a great start with a killer core team including myself, ZMoose and Zealand Browne.  If you have ot already signed up for the free 30 day trial, do it! There is no reason not to.  Everyone loves a risk free trade right? The trial lets you check out our research risk free.

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TDL Research

As many regular readers of The Davian Letter may have noticed, I have been m.i.a. for the past few weeks. I took a hiatus of sorts to wrap up the Fall semester here at LSU and now that finals are over and markets have gone quiet (relatively) for the holidays, am relaxing a bit before getting back in the swing of things after Christmas to prepare for what should be an exciting 2010 in markets, but more importantly for The Davian Letter with the launch of Stock.ly and Davian Letter Research.

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FX/Eco Data Notes - BoJ

The Bank of Japan left monetary policy unchanged as expected, leaving the overnight call rate at 0.1%. The only thing I was looking for was tweaks to the language in the statement. The BoJ did in fact add some slightly hawkish elements.

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FX/Eco Data Notes

U.S. Headline CPI increased 0.3% MoM, slightly above expectations of 0.2% MoM. Prices were less negative on a YoY basis at -0.2%. Core MoM was flat from September at 0.2%. YoY core was up 1.7%. YoY headline should be moving into positive territory soon, but at the same time, there is nothing to indicate any rapid price increases yet. BoE minutes showed that two members of the MPC dissented against the decision the leave the bank rate at 0.5% and increase the asset purchase program by £25 billion to £200 billion and complete purchases in the next three months.

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FX/Eco Data Notes - U.K. CPI, U.S. PPI & Fedspeak

In what seemed to be a complete 180 from Chairman Bernanke’s speech yesterday, San Francisco Fed President Janet Yellen said “Higher rates than called for based on purely macroeconomic conditions may help forestall a potentially damaging buildup of leverage and an asset-price boom,” Then qualified those remarks by saying, “use of monetary policy for these ends necessarily compromises the attainment of other macroeconomic goals,” (full story at Bloomberg) The second part says

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FX/Eco Data Notes

I got to my desk this morning as jobless claims were released to see 502k, slightly better than consensus of 510k and proceeded to watch treasuries get whacked. Equities wee bid up only to stall at 1100(in ES futures).

In other data, Euro Zone industrial production increased by 0.3%, slightly lower than expectations of around 0.6%. Swedish CPI was -1.5% YoY.

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FX/Eco Data Notes

Chinese data was released last night. The data had few surprises. CPI was in-line with forecasts at -0.5%. Fixed asset investment increased by 33.1% YoY. Industrial production rose 16.1% YoY. PPI slowed more than expected to -5.8% vs. expectations of -5.0%. Retail sales data were the only numbers that surprised higher than expectations, 16.2% vs. forecast of 15.7%. Foreign trade increased to $24 billion on improving(less negative) exports.

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FX/Eco Data Notes

Australian Retail sales surprised to the downside contracting by -0.2% MoM vs. forecasts of 0.7%. The decline was led by sales in department stores which contracted by -2.9%, clothing and soft goods, by -0.8%. Food sales were flat and Café and Restaurants were up 1.1%. Despite weak number, AUD/USD only sold off briefly as risk is back on across the board as of last night.

Euro Zone Industrial producer prices fell more than expected but 7.7% YoY, -0.4% MoM but data were outweighed by other factors in terms of market impact.

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FX/Eco Data Notes - RBA

Last night, the RBA raised its target cash rate to 3.50% as expected. AUD/USD had been quite overextended and rate expectations too high. I know the RBA was first to raise rates, is upbeat on growth, but expectations of a 50bp increase were a bit ridiculous particularly given rising Aussie. The RBA confirmed this in its statement by noting the rising exchange rate is likely to constrain output in the tradables sector. A 50bp move would have been begging for hot money inflows.

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FX/Eco Data Notes

Last night the Bank of Japan left its overnight call rate unchanged at 0.10% as expected. The more significant action by the BoJ is the removal of extraordinary policy measures including outright purchase of commercial paper and corporate bonds. That said, the action was not market moving because it merely cemented the timelines for withdrawal. Special funds-supplying operations to facilitate corporate financing will remain in effect until March 2010. From April 2010 going forward the BoJ will provide liquidity through funds-supplying operations against pooled collateral.

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