Carry Traders Bail Out of Yen Shorts Ahead of G7 (page 2 of 2)

Specifically, both expectations and employment sub-indexes dipped for the month, supporting a rate cut bias. However, still supportive of a likely rate cut is the fact that prices advanced in January. Taking a look at the sub-index, average prices charged rose to the highest measure since August, printing a 55.2. The figure climbed from the December number of 53.2. Input prices also jumped higher, rising to 60.1, the highest since last September. A mouthful, the survey's sub-indexes simply show that prices are still elevated in the economy and may lead to higher consumer prices in the near term, lending to a likely hike. However, given the current production and employment measures, spending may once again be at risk. The emergence of this weakness could jeopardize the highly touted aggressiveness of the Bank of England through the year, leading to the next hike being the bank's last.

Japanese Yen - With the G7 meeting scheduled for this weekend, it is hardly surprising that the Yen is the day's biggest market mover. The latest drop was triggered by speculation on the government run television network NHK, that European nations will force the weak Yen to be a discussion topic at the G7 meeting. This was further confirmed by Eurogroup head Junker. However, these discussions will most likely be sideline discussions rather than an official one that makes it to the statement. The US is far too concerned about China at the moment to worry about the Yen, especially since the Yen is not trading at any significant levels against the US dollar. Nevertheless, the G7 meeting has led to huge market swings and just the possibility of that is enough to cause some short yen traders to take profit.

Commodity Currencies (CAD, AUD, NZD) - Lots of commodity strength on the day as the Canadian, Australian and New Zealand dollars made some headway against the US dollar. In the overnight, Australia's retail sales pared back from previous gains along with consumer prices. It seems that now after raising rates last year, the Reserve Bank of Australia is getting their wish of lower spending and cooler inflationary pressures in the country. According to the Bureau of Statistics, retail sales figures rose less than expected, advancing only 0.3 percent in the month. Subsequently, consumer prices, the main focus, cooled from a 3.3 percent pace to 3.1 percent on the annualized figure. What does this mean? It simply means that rates are finally helping in curbing consumer enthusiasm, allowing the RBA some leeway in issuing monetary policy. As a result, although likely to not raise rates this time around, policy makers have an option should issues flare up. Separately, according to the Ivey PMI, Canadian business and government spending picked up for the first time in 4 months in January. The index rose to 53.8, considered bullish for the CAD, as production expanded in the economy. Coupled with higher crude prices on a Northeastern cold snap, the report gave the Canadian currency a temporary lift.