- Moody’s downgraded Italy, Spain and Portugal and placed the UK, France and Austria on AAA negative watch
- UK FinMin Osborne: Moody’s downgrades proof that UK must stick with austerity plans
- BOJ left rates unchanged but increased asset buying fund from Yen55 trln to Yen65 trln, all to be spent on JGBs. They also introduced a 1% policy inflation target.
- RBA Debelle: Rates appropriate for economy as a whole
- Australian business confidence +4 in January, up from +3 in December
- Fed’s Williams: Vital to keep monetary policy throttle wide open
- RICS data shows UK housing market staying weak
- Nikkei bounces sharply after BOJ, now +0.7%; other markets -0.4% on average. Gold $1719/oz
The first move of the day was in EUR/USD and EUR/JPY, with both falling on the news of the Moody’s downgrades. This news wasn’t totally unexpected and both pairs were limited to 50 pip dips. The market eyed and triggered stops in EUR/USD below 1.3150 but talk of Asian Sovereign demand between 1.3130/40 dissuaded the bears and encouraged profit taking. EUR/JPY has gotten a late boost after the surprise increase in asset buying by the BOJ. Ranges: EUR/USD 1.3143/93; EUR/JPY 101.80/102.62
USD/JPY fell early in the session on EUR/JPY sales, as the market anticipated a risk-off session after the Moody’s downgrades. The BOJ announcement led to a wave of Yen selling but plentiful USD/JPY corporate offers on the approach to 78.00 have slowed momentum down. The fact that the new spending will be on JGBs rather than foreign assets has also limited the effect on the Yen pairs. Ranges: 77.35/95
AUD/USD fell through most of the session, as risk sentiment waned on the Moody’s downgrades. AUD/JPY buying after the BOJ did help initiate a modest recovery. Ranges: 1.0661/1.0738
Cable fell heavily after Moody’s put the UK’s AAA rating on negative watch. Range: 1.5700/70.
EUR/CHF 1.2072/89
