News & Data:
Asian markets opened higher on Tuesday. Chinese equities rebounding from Monday’s losses. PBoC injected a net CNY270B as it continues to ramp up liquidity to counter tighter funding. Yuan remains near a three-year high against the dollar. Bundesbank’s move to add yuan to its forex reserves may be seen as a win for Beijing’s liberalization push.
Nikkei has broken out of a recent consolidation, with the yen climbing off its lows after some jawboning comments by Finance Minister Aso. ASX was seen to underperform, signaling a broad based weakness. Miners tracking losses in metals prices with Rio Tinto’s Q4 production report also failed to impress. The lack of any cues from Wall Street yesterday led to subdued trading in the Asia and Australia today.
Euro has been hovering near a three-year rise, as market expectations of a hawkish policy shift continue to rise. Latest gains follow remarks from ECB’s Hansson, who said Monday it would be appropriate to end asset purchases in September if growth and inflation evolve as expected. Prospects of a global central bank tightening shift have been widely attributed for the recent bond rout, yiels have risen modestly in Tuesday trade.
UK’s CPI report is slated to come out today, with headline YoY inflation expected to come down by .1% from the five year high of 3.1% hit last November. This can boost GBP in the near term, as it increases the chances of a BoE rate hike.
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