Markets Cheer BOJ Easing But US GDP Data May Cool Optimism

2016-01-29 07:59:00 Ilya Spivak, Head Strategist, APAC

Talking Points:

Yen drops as Bank of Japan shocks markets with negative rate policy
Australian, NZ Dollars follow stocks higher on firming risk appetite
US Dollar may rise as sentiment sours if US GDP data outperforms

The Japanese Yen underperformed in overnight trade after the Bank of Japan unexpectedly introduced negative interest rates into its monetary policy framework. Policymakers adopted a three-tier system akin to that of Switzerland, Sweden and Denmark: a portion of deposits at the BOJ will earn interest of 0.1 percent, the next layer will earn 0.0 percent, and the final component will be subject to a rate of -0.1 percent.

The expansion of monetary stimulus helped boost risk appetite, sending the sentiment-linked Australian and New Zealand Dollars higher alongside Asian stock prices. S&P 500 futures registered a similar response and continue to point higher ahead of the opening bell on Wall Street, hinting that the upbeat mood is poised to carry through into the week-end.

The release of fourth-quarter US GDP figures threatens risk-on follow-through however. Output is seen growing at an annualized pace of 0.8 percent, a marked downtick from the 2.0 percent recorded in the three months through September 2015.

A soft print may pass with relatively little fanfare considering the already significant downgrade of Fed rate hike bets in recent weeks. An upside surprise that clashes with the priced-in status quo is likely to produce a more pronounced response, forcing portfolio readjustment that undermines risk appetite and boosts the US Dollar.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
21:45	NZD	Building Permits (MoM) (DEC)	2.3%	-	2.4%
23:30	JPY	Jobless Rate (DEC)	3.3%	3.3%	3.3%
23:30	JPY	Job-To-Applicant Ratio (DEC)	1.27	1.26	1.25
23:30	JPY	Overall Household Spending (YoY) (DEC)	-4.4%	-2.5%	-2.9%
23:30	JPY	Natl CPI (YoY) (DEC)	0.2%	0.2%	0.3%
23:30	JPY	Natl CPI Ex Fresh Food (YoY) (DEC)	0.1%	0.1%	0.1%
23:30	JPY	Natl CPI Ex Food, Energy (YoY) (DEC)	0.8%	0.9%	0.9%
23:30	JPY	Tokyo CPI (YoY) (JAN)	-0.3%	0.0%	0.1%
23:30	JPY	Tokyo CPI Ex-Fresh Food (YoY) (JAN)	-0.1%	0.1%	0.1%
23:30	JPY	Tokyo CPI Ex Food, Energy (YoY) (JAN)	0.4%	0.6%	0.6%
23:50	JPY	Industrial Production (MoM) (DEC P)	-1.4%	-0.3%	-0.9%
23:50	JPY	Industrial Production (YoY) (DEC P)	-1.6%	-0.6%	1.7%
23:50	JPY	Loans & Discounts Corp (YoY) (DEC)	2.6%	-	2.7%
00:01	GBP	Lloyds Business Barometer (JAN)	45	-	45
00:05	GBP	GfK Consumer Confidence (JAN)	4	1	2
00:30	AUD	PPI (QoQ) (4Q)	0.3%	-	0.9%
00:30	AUD	PPI (YoY) (4Q)	1.9%	-	1.7%
00:30	AUD	Private Sector Credit (MoM) (DEC)	0.5%	0.6%	0.4%
00:30	AUD	Private Sector Credit (YoY) (DEC)	6.6%	6.7%	6.6%
02:00	NZD	Money Supply M3 (YoY) (DEC)	8.1%	-	8.4%
03:38	JPY	BOJ Annual Rise in Monetary Base	¥80T	¥80T	¥80T
03:38	JPY	BOJ Basic Balance	0.1%		-
03:38	JPY	BOJ Macro Add-on Balance	0.0%		-
03:38	JPY	BOJ Policy-Rate Balance	-0.1%	-	-
04:00	JPY	Vehicle Production (YoY) (DEC)	-2.3%	-	6.1%
05:00	JPY	Housing Starts (YoY) (DEC)	-1.3%	0.5%	1.7%
05:00	JPY	Annualized Housing Starts (DEC)	0.860M	0.888M	0.886M
05:00	JPY	Construction Orders (YoY) (DEC)	14.8%	-	5.7%

European Session

GMT	CCY	EVENT	EXP/ACT	PREV	IMPACT
06:30	CHF	SNB 4Q 2015 Currency Allocation	-	-	Medium
06:30	JPY	BOJ’s Kuroda Gives Press Conference	-	-	High
06:30	EUR	French GDP (QoQ) (4Q A)	0.2% (A)	0.3%	Low
06:30	EUR	French GDP (YoY) (4Q A)	1.3% (A)	1.1%	Low
07:00	EUR	German Retail Sales (MoM) (DEC)	-0.2% (A)	0.4%	Low
07:00	EUR	German Retail Sales (YoY) (DEC)	1.5% (A)	2.4%	Low
08:00	CHF	KOF Leading Indicator (JAN)	96.0	96.6	Low
09:00	EUR	Eurozone M3 Money Supply (YoY) (DEC)	5.2%	5.1%	Low
10:00	EUR	Eurozone CPI Estimate (YoY) (JAN)	0.4%	0.2%	High
10:00	EUR	Eurozone CPI Core (YoY) (JAN A)	0.9%	0.9%	High