Your forexlive.com ENewsletter

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• Pound tumbles in late NY trading as Moody’s downgrade UK credit rating to Aa1
• Abe moving quickly after Obama meeting – set to announce Japan entry into TPP talks
• More on next week’s expected announcement of the nomination for BOJ head
• Bloomberg article: Bernanke eases asset bubble concerns
• IMF says recent concerns over competitive currency devaluations are “overstated”
• Japan’s Upper House machinations continue to impact on succession choice for BOJ Governor
• World Trade Organisation supports Japan’s anti-deflation policies but calls for more structural reform
• Talk in the press a new BOJ head could be announced as soon as Monday
• Wall Street Journal article: Fast Money Pulls Back on Yen Trade
• Japan press headline: Gov’t sees ADB’s Kuroda as likely candidate for next BOJ chief
• ForexLive Americas wrap: UK gets a moody shoe-ing
• UK downgraded by Moodys
• US equity close: Strong finish to the week
• More Abe-bama
• One for the Europeans
• The Abe/Obama party is not finished yet.
• GBP/USD update
• Fools gold or gold fools?
• Something for our resident Italians to take them into the big vote.
• It’s not all hate from the Germans

Pound tumbles in late NY trading as Moody’s downgrade UK credit rating to Aa1 Posted: 23 Feb 2013 01:40 AM PST As Ryan reported in his American posting’s, Moody’s last night announced they were downgrading UK debt from Aaa to Aa1, the first time such a move has been made since 1978. The Pound understandably plunged in late trading with GBPUSD ending down at 1.5162, EURGBP up at 0.8698, GBPCHF 1.4090, GBPJPY 141.61 and GBPAUD at 1.4689 Given all the recent talk of a downgrade, and the rumour last week that S&P would be first to do so, there is an argument to say that much of the  selling had been factored in already and that the move last night was very much one of a knee-jerk reaction.  However, the fact that it occurred so late in trading means that other time zones have yet to respond. We shall know more tomorrow night in Asia and on Monday when Europe opens up. I will post some further thoughts in due course, but in the meantime here’s the Moody’s announcement and what some of the UK press are saying so far. http://www.moodys.com/research/Moodys-downgrades-UKs-government-bond-rating-to-Aa1-from-Aaa–PR_266844 http://www.bbc.co.uk/news/business-21554311 http://www.telegraph.co.uk/finance/economics/9889410/Britains-credit-rating-downgraded-from-AAA-to-Aa1.html http://www.guardian.co.uk/business/2013/feb/22/uk-credit-rating-downgraded-moodys

Abe moving quickly after Obama meeting – set to announce Japan entry into TPP talks Posted: 22 Feb 2013 09:01 PM PST Japan’s PM Shinzo Abe may announce Japan's participation in the Trans-Pacific Partnership free-trade talks to the Diet (the Japanese parliament) on either Feb. 28 or March 1, according to sources. Abe has faced stiff internal LDP resistance to the TPP and may have to seek exemptions for some agricultural products, and other measures to support local farmers. Japan Times Earlier post re the World Trade Organisation calling on Japan to implement structural economic reforms, such as freeing up trade. Entering TPP talks would be progress on this.

More on next week’s expected announcement of the nomination for BOJ head Posted: 22 Feb 2013 08:47 PM PST Earlier today I posted up a couple of stories: An article in the WSJ implying the nominations could be announced as early as Monday. A headline from Japan naming current Asian Development Bank Head Kuroda as a ‘likely’ candidate. Just to thicken the plot, this article from Reuters carries the news Abe says he ‘wants to make headway’ on Monday, “I understand different parties have different ideas. But I would like to start talking with them – the Democratic Party, Your Party, Japan Restoration Party and others,” I thought he may have already started talking with them. Apparently not.

Bloomberg article: Bernanke eases asset bubble concerns Posted: 22 Feb 2013 07:35 PM PST A bit more weekend reading. Federal Reserve Chairman Ben S. Bernanke minimized concerns that the central bank's easy monetary policy has spawned economically-risky asset bubbles in comments at a meeting with dealers and investors this month, according to three people with knowledge of the discussions. The meeting referred to is “the 15-member Treasury Advisory Borrowing Committee … made up of representatives of companies including JPMorgan Chase & Co., Goldman Sachs Group Inc., Pacific Investment Management Co., and Bank of America Corp”. The meeting is private. This committee then advises the US Treasury on how to raise funds to finance government spending. There might be a good argument to be made that the discussions at the meeting could be made public? Bloomberg

IMF says recent concerns over competitive currency devaluations are “overstated” Posted: 22 Feb 2013 07:29 PM PST Public support for Japan’s policies continues from the G20, the US, the WTO and, according to this article, the IMF. The recent sizable depreciation of the yen has sparked concerns about competitive devaluations, the IMF said Thursday in a report on global prospects and policy challenges. "Taking a broader perspective, however, such concerns seem overstated," it said, The ‘broader perspective includes: The yen's downswing also came after "a period where the exchange rate was assessed to be moderately overvalued," The organization thus showed understanding of the Japanese government's argument that the currency's recent movements represent a correction to its excessive appreciation. Japan Times

Japan’s Upper House machinations continue to impact on succession choice for BOJ Governor Posted: 22 Feb 2013 07:24 PM PST An article concerning the likely passing of the supplementary budget for fiscal 2012 contains a brief discussion also of the Upper House hurdles facing the government in having the new head (and two deputies) appointed to the BOJ: The supplementary budget for fiscal 2012 now appears more likely to clear the opposition-controlled House of Councillors, after a handful of opposition lawmakers indicated their willingness to vote for it. Jiji

World Trade Organisation supports Japan’s anti-deflation policies but calls for more structural reform Posted: 22 Feb 2013 07:20 PM PST The WTO conducted a biennial policy review on Tuesday and Thursday this past week: In the review, Japan was urged to address its high tariffs on agricultural products, a delay in the liberalization of the services sector and nontariff barriers in government procurements, sources said. South Korea and China expressed concerns about the yen's recent rapid falls on the back of strengthened monetary easing by the Bank of Japan. Jiji

Talk in the press a new BOJ head could be announced as soon as Monday Posted: 22 Feb 2013 07:16 PM PST According to the Wall Street Journal: As soon as Monday, Japan’s prime minister is expected to carry out a campaign promise to select a new central-bank chief committed to a revival of slumping prices, investment and consumer spending in the world’s third-largest economy. Japan Seeks Ticket to Growth From New Central-Bank Chief (gated, try a news earch on the headline)

Wall Street Journal article: Fast Money Pulls Back on Yen Trade Posted: 22 Feb 2013 07:13 PM PST After the yen’s tumble in recent months, some investors are taking profit. The article quotes two trading firms that have squared their positions after being short yen for around 3 months. Says one: But it unwound its short-yen positions on Jan. 30 on a view that continuing to bet against the currency wasn’t worth the risk given diminished profit prospects, he said. “We’ve come to where we should” be, Mr. Schutzman said. Fast Money Pulls Back on Yen Trade (Gated – try a news search on the headline)

Japan press headline: Gov’t sees ADB’s Kuroda as likely candidate for next BOJ chief Posted: 22 Feb 2013 07:04 PM PST Just a headline at this stage, no further details.

ForexLive Americas wrap: UK gets a moody shoe-ing Posted: 22 Feb 2013 02:22 PM PST Canadian Dec retail sales slump to -2.1% from -0.5% exp Canadian CPI slips also to 1.0% from exp 1.1% Fed’s Bullard: Still have too big to fail problem, inflation lower than target, more room for maneuver, global uncertainty way down from highs, policy to remain easy. ECB Nowotny: Repayment of LTRO is a sign of normalisation German EU parliament president Martin Schulz sticks the knife into Berlusconi Fed’s Powell and Rosengren speak at US monetary policy forum in New York US economic growth measured lower Greece goes digging for gold Fed buys $1.45bn (from $5.24bn offered) in long dated treasuries Germans turn hostilities toward France Italy goes to the polls this weekend Obama: Overall impact of sequester cuts will be to slow down economy Obama and Abe: Abe agrees with Obama to strengthen Japan-US alliance, US and China to benefit, no intention to escalate tensions with China. More here also Germans show they they’re not all bad Stocks close strongly into the weekend UK loses triple A status from Moodys A nice quiet meander into the US close was shattered by Moodys. They cut the UK’s   triple A rating down one notch to AA1. Sterling took the ‘below the belt’ knock and closes on the canvas down at 1.5162. While some of the downgrade may have still been priced in the timing will leave a lot of questions to be answered on market open Sunday night. EUR/USD started the session up towards 1.3200 after dropping from European session highs at 1.3248. A trip down to break a 1.3150 barrier didn’t follow through and a gradual climb back ensued. Italy elections over the weekend kept the range tight. USD/JPY had a pretty uneventful day. Again, we await events over the weekend as nominations are presented for the BOJ head. A feeble attempt was made at the 93.50 level on comments from Obama & Abe crooning over getting along. A preview of the BOJ decision can be found here. USD/CAD took a 60 pip rocket up to 1.0250 after atrocious retail sales figures.  The CPI still wasn’t playing ball with the BOC target and thus rate hikes seem even further away. The pair closes at 1.0213 AUD/USD. We’re at 1.0300.  I give up . Just for good orders sake, Canadian budget balance came in at -0.57bn. Only 6 hours late but I got it to you in the end. Thank you once again for having me and for all your reader contributions. Stay tuned to ForexLive over the weekend as we bring you the press news that matter.

UK downgraded by Moodys Posted: 22 Feb 2013 01:34 PM PST Bond rating down to AA1 from triple A, outlook stable. Cable slapped down to 1.5180. Crosses also hit. EUR/GBP surging to 0.8680 GBP/JPY down to 141.78 GBP/CHF down to 1.4117 Moodys says rating cut due in part to continued weakness in medium term growth outlook. Expects sluggish growth to extend into the second half of the decade. UK credit outlook stable, expect political will and underlying economic strengths to allow fiscal consolidation and reverse debt trajectory. UK credit worthiness remains “extremely high” Now, we all know the rules. First the country gets downgraded, then the banks. No doubt we’ll be hearing more on Monday. The fiendish cads!! On a Friday night?? That’s just not cricket you know.

US equity close: Strong finish to the week Posted: 22 Feb 2013 01:11 PM PST Stocks have closed on their highs for the day. S&P 500 +12.84 pts to 1515.26 +0.85% On the week -0.3% Dow Jones +117.93 pts to 13998.55 +0.85% On the week +0.1% Nasdaq +29.81 pts to 3161.30 +0.95% On the week -0.9% First down week for the year in S&P but the strong rebound back through 1500 will be a relief to the QE chasing brigade.

More Abe-bama Posted: 22 Feb 2013 01:01 PM PST Joint statements coming out now. More  remains to be done in addressing outstanding concerns in auto and insurance sectors, to continue bilateral consultations Japan should participate in TPP (trans pacific partnership) negotiations. All goods subject to negotiation Japan not required to to make prior commitment to unilaterally eliminate all tariffs upon joining TPP talks

One for the Europeans Posted: 22 Feb 2013 12:25 PM PST You lucky guys and girls should all be out hitting the pubs and clubs by now while I’m stuck here typing away at my desk. No rest for the wicked eh?  Here’s something to get you in the mood.

The Abe/Obama party is not finished yet. Posted: 22 Feb 2013 11:58 AM PST I’ll never get my wrap started at this rate. Abe agrees with Obama to strengthen Japan-US alliance Trust and the strong bond between Japan and the US revived United States, China and others will benefit from Abenomics as Japan imports more (did he really use Abenomics??) Japan cannot tolerate any challenges to its territorial sovereingty Has intention to escalate tensions with China, door open to Chinese leaders (I’m sure it should read “no intention”) No sweeties for North Korea unless it plays nicely. Officially: No rewards for NK unless it gives up nuclear missile programs and releases abductees. News feed confirm comment should have read “no intention to escalate tensions”. You do have to wonder sometimes, wars have been started over less. Japan stimulus will mean more business for US and Asia

GBP/USD update Posted: 22 Feb 2013 11:50 AM PST Cable is starting to look a little soft and has hit new lows at 1.5238. There’s seems to be no great effort to move the market as we close out. After the long term support areas broke between 1.5235/70 it was down the trap door to 1.5130. A bounce was inevitable. I should think that anyone who took advantage of that bounce is taking some profit into the weekend. I certainly don’t envisage this move is down to anyone loading up shorts. As I speak we touch 1.5235.

Fools gold or gold fools? Posted: 22 Feb 2013 11:35 AM PST An article I happened upon a couple of days ago concerning gold predictions came out with the recent downward moves. As always people are quick to knock others when the market turns and although some of the predictions are far fetched it’s interesting to go back and see who said what. 8 Ultra-Gold Bulls Who Look Foolish Right Now Gold had a recovery yesterday up to the previously broken trendline at 1586 it was denied and we’ve since drifted lower. If you want a text book definition of a market that goes by the tech levels you need not look further than the Gold chart.

Something for our resident Italians to take them into the big vote. Posted: 22 Feb 2013 11:29 AM PST A favourite piece of mine from a well known film. Written by famous Italian composer Ennio Morrecone.

It’s not all hate from the Germans Posted: 22 Feb 2013 11:15 AM PST Germany’s fin min Wolfgang Schaeuble has come out in defence of France against criticism from CDU party member Martin Schulz who accused France of being the ‘problem child’ of Europe. Schaeuble speaking in an interview for Saturdays edition of the Stuttgarter Zeitung newspaper said that France will abide to its European requirements, adding that he could not understand why people keep making demands on France to fulfil its obligations. “I’m completely confident that France will not only stick to European rules but will also do everything it can to generate growth while undertaking structural reforms in a difficult economic phase” From Stuttgarter Zeintung via reuters The way it’s going I don’t know whether to dust off the tin hat or get the tissues out.

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