EURJPY Trend & momentum 11-Aug-2015

Expectation of Greek deal bring positive sentiment into the market, and EUR has been steady for last days. In Asia and Pacific market, since CNY (CNH as offshore) was devalued as poor economic figure, AUD also became weaker, which implies Australian dependence on Chinese economy.

Reuters >> China devalues yuan after poor economic data

The trend and momentum indicates EURJPY is expected downward trend in a coming week while EURJPY have been steeply going up by now.

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Policy driven market 22-Jan-2015

Last week, SNB announcement about Franc cap removal brought the hugest impact in currency market. However, certain level of surprise have seen in the market for this week.

Canadian Dollar [CAD]
Bank of Canada unexpectedly cut the overnight rate 25bp from 1.0% to 0.75%. CAD has been declined against most of major currencies after the announcement. According to the announcement, plummeting oil price weigh on Canadian economy.

GBPCAD has stayed around 1.82 - 1.83 earlier this week, and now it is around 1.86 though it is less than the peek in this week.

Ref. Bank of Canada cuts key rate to 0.75% as oil plunge takes toll on economy


Danish Krone [DKK]
Danish Krone has been weaken due to the consensus that DKK peg to EUR could be abandoned for ECB announcement. Danish Central Bank responded to ECB announcement, cutting interest rate. EURDKK stays around 7.44, which was 7.43 at the beginning of this week.

Ref. REFILE-UPDATE 2-Danish c. bank intervenes to weaken crown, cools rate cut talk


Euro [EUR]
It was not surprised that ECB announced that they will bring additional QE. However, ECB indicated the monthly purchase for 60 billion euro more than the market consensus 50 billion euro. EUR has been down after the announcement against major currencies.

Ref. 
GLOBAL MARKETS- Shares rise, euro slides as markets cheer ECB QE plan
UPDATE 4-Oil prices above $49 ahead of ECB bond buying move


Sometimes, the surprise by political matters makes financial market more volatile, but it might have been more than expected since last week. Greek election is still ahead, and it may bring further volatility into the market.

While many market events have been driven from European market, unexpected events could come from Asian Pacific market.
Australian dollar is considered as higher than RBA prefers, which the governor of RBA mentioned last month. (RBA boss Glenn Stevens says 75 US cents is ideal level for Aussie dollar)
If Chinese market indicates its slow down clearly, Chinese interest rate could be cut further and Australian economy would be slow down due to their dependence on Chinese economy.

Are we in Stagflation? 15-Nov-2014

Imagine that your money in the bank account is gradually decreasing time to time.

Obviously, you never see your savings decreasing, instead, you see the savings increasing according to the interest rate. In this meaning, your savings will be same or even more amount time to time.

However, consumer price is increasing time to time as well as your savings are increasing. Question is which of them is increasing in larger scale? If interest rate is greater than inflation, you implicitly win the spread between interest rate and inflation. If opposite, you implicitly lose.

This figure shows the spread of annual interest rate and inflation rate after FX impact adjusted.

Scores of the economic zones, US, UK, Europe have stayed in negative since Lehman crisis. Japanese and Australian scores have been up and down since that time. Currently, only Chinese economy has positive score.

It implies that value of money is relatively decreased in those major economic zones except for China.

Normally, once inflation is going up, the interest rate is also going in order to limit the inflation. But it seems major economy is vulnerable to deflation back again, and this may lead the interest rate being kept at record low level for coming years.

In this situation, diversification into other asset classes can be hedging strategy against inflation risk.