Japanese Tankan Survey Sinks

Market Brief

The Usd was weaker in the Asian Session, despite the weak Japanese economic news. The EurUsd traded sharply higher to 1.3500 from 1.3360, while the UsdJpy, in choppy trading, moved lower to 90.80 from 91.40. Asian regional indexes continued to grind higher, as Japan's Tankan index fell to -24 from -3, the lowest reading since 1974. In addition, China's Industrial Production saw its lowest growth since 2002. The tentative optimism / risk taking seen in the equity markets suggest that the recent trend of Usd strength on negative US economic news now looks to be shifting. However, we are not yet set to call an end to the de-levergaing flow, which has supported the Usd, and will be monitoring risk appetite carefully. European stock futures are pointing to a higher open and commodities are gaining on the positive sentiment.

In Japan, the Tankan survey showed the largest quarterly drop since 1974 and the forward looking indexs were also very weak at -36. Prime Minister Aso said Friday that supplementary stimulus package to boost economic growth will specifically target the labor market. The market is expecting the BoJ to hold rates steady at 0.30% on Thursday and there is little support for anything otherwise.

ACM FOREX

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