$Pound Outperforms as BoE Holds Interest Rate, Easing Unchanged

 THE TAKEAWAY: Bank of England says interest rates, quantitative easing unchanged -> China cuts interest rates for the first time since 2008 -> UK Pound climbs against US Dollar
The Bank England decided today to keep its monetary policy steady at the end of its 2 day deliberation process, sparking a wave of outperformance in Sterling and invalidating speculation that the central bank would take a more dovish stance.
The June benchmark interest rate will remain unchanged at 0.50%, and the BoE’s quantitative easing target will stay at 325 billion pounds. Although economists did not expect a change today, speculation that the central bank would adopt further accommodative measures had grown recently on news of the worsening political crisis in Europe.
Even so, further easing in the months to come cannot be ruled out. The Bank of England’s most recent monthly inflation report said “the possibility that the substantial challenges within the Euro area will lead to significant economic and financial disruption continues to pose the greatest threat to the UK recovery.”


The British pound spiked on the news that further easing will be delayed for at least a month. The Pound was strong against the Euro and US Dollar directly after the report.

(((Sterling Strengthens as BOE’s Posen Drops Call for Easing Increase)))

THE TAKEAWAY: MPC member changes mind on easing; QE vote 8-1 as BOE minutes strike hawkish tone-> BOE wary of upside CPI risk -> Cable jumps on the news
Adam Posen ended his push for increased quantitative easing and the dovish David Miles appeared wary of upside inflation risks, minutes from the BOE’s most recent meeting revealed today. In an abrupt change of mind, Posen joined the majority of the Monetary Policy Committee in voting to leave easing unchanged, while Miles described his views on increased easing as “finely balanced.” All 9 MPC members voted to keep interest rates unchanged at ultralow levels.Sterling gained as an increase in quantitative easing became less likely.

 The BOE’s hawkish tone reflected recent comments made by MPC members suggesting that inflation may prove harder to control than previously believed. MPC member Tucker yesterday said inflation may not fall as fast as hoped, and described recent news on inflation as “bad.” Upside CPI risks come from oil and commodity price increases.
The recent comments struck a different tone than last month’s Minutes, in which the central bank said it sees inflation easing to manageable levels in the coming years.
The BOE Minutes additionally reckoned that GDP results in Q1 and Q2 may actually register a recession. The central bank said growth could contract in one or successive quarters because of weak construction during the Jubilee holiday.The Minutes also said that the global recovery is proceeding broadly as expected, concerns out of the Eurozone are now greater if anything.

Bank of England, the ECB Drop Easing Bias…for now

The Bank of England and the European Central Bank announced today that they would some changes to the existing monetary policy, which was in large part by the markets and in line with the consensus forecast. The BoE said that they would retain the reference rate to 0.5%, and that the programme for the purchase of the assets of the Bank would be maintained at the current level of £ 325 billion pounds.Prior to the announcement, the GBP/USD pair more rated 1.5808, but has lost some glitches after moving to 1.58. Santoshtiwari guru of the British pound closed a long position in the pair a short time, returning a profit of 10.25% for him and his more than 1300 copiers; a long position opened this month is closer to breaking even, currently by about 40 pips. A sustained demonstration could see this and its other open long, green. In the event that the BoE was surprised, however, this guru was ready with an order to buy down if the price should drop 1.5763.
Well diversified OpenBook guru sadiqashanaz97 was regularly scalping of long positions in the pair, content and the benefits of booking of 40, 20 or even 10 pips. While the time of the Guru is an average of four days, a long position, launched in August 2011, 1.6254, remains open. This trade would need a gathering of Sterling driving hard to make a profit. While this guru allocates only about 10% of its portfolio to the pair, she provided a yield of 1.9% in the six months. With 2 471 supporters and 383 copiers registered 457.7 profit % in 12 months, it is a near certainty that this guru will be just wait patiently for this rally to occur.
The ECB has even said that they would take their reference to 1% interest rates, given that the crisis in the euro area seems about to finally stabilize and the Bank inflation targets remain in the upper range. What investors look forward to know is whether the ECB had intended to launch another course. Mario Draghi, the head of the ECB, said that both of the previous global are undeniable but stressed again that the non-standard measures are temporary at best; that did not, however, firmly closed the door on the possibility of another course.
Entering was also higher than before the announcement, the 1.3258 and mostly optimistic feel about OpenBook. the pair slid to 1.3237 after the release of press, but always held in positive territory. OpenBook guru pawelskrzypek, who is very meticulous and methodical in making his decision, opened three short positions earlier today in the EUR/USD, which is trade exclusively with one of these short films already in the green. Guru Hschinner, who recorded a profit of 337% for the last six months, is also a bear for the pair, opening a court yesterday to add to the two, he opened in mid-January. Last week, his TP affected almost every day on a short position with more than 6% of average performance.
Measures of the ECB, the basic materials of the Euro continue to miss, and until the Greek situation is resolved satisfactorily, a downward trend is surely the conservative.
In the absence of any bias clear additional easing by each Central Bank will help finally to strengthen the currency of the country. When the question is disorder, of course, is already greater than 0.8386 EUR/GBP. Regardless of the orientation of the Central Bank, the underlying factors that supports a currency are likely to play a much more important role in the direction of the pair.

OpenBook Traders Anticipated Bank of Japan’s Easing Action

Earlier today, the Bank of Japan unexpectedly intervened in the rise of the Japanese Yen, essentially pulling out all of its big guns, which sent the Japanese Yen, against all of its major crosses, lower. Though an intervention had generally been speculated about and anticipated over the past several weeks some OpenBook traders were caught by surprise. But not OpenBook trader mcmkiama08, who held two open longs in the USD/JPY and EUR/JPY pairs which returned nearly 40% and 39%, respectively. Trader siffan also benefited from the central bank’s move, closing out nine longs in the USD/JPY with an average return of 27%; a newcomer to OpenBook, this trader is on the way to posting a 65% return for the week and 44.3% for the month.
Among the OpenBook gurus, robepu closed out a long in the EUR/JPY pair, which gave him a gain of more than 27% and is sitting on another long which is currently at break-even. Guru Piethein is sitting on USD/JPY open long position which is already returning almost 27%. As of this writing, sentiment on the USD/JPY is primarily bearish, with traders anticipating that the Yen’s weakening will have run its course.
Recently, the Japanese government reported that the economy contracted 2.3% in the 4th quarter of 2011 on an annualized basis, below expectations. Earlier today, the Japanese Ministry of Economy, Trade and Industry reported that January’s industrial production fell to 3.8% on a month over month basis, below the 4.0% forecast. The Bank of Japan said that they would “pursue powerful monetary easing” and will do it through holding interest rates at the current near zero levels and setting an inflation goal of maximum 2% for the medium to long term and an immediate goal of 1%. Further, they will increase by 10 trillion Yen its program of asset purchases with the new aggregate amount 65 trillion Japanese Yen.

FOREX MEWS - Yen falls on BoJ easing; euro cushioned by ZEW survey

* BOJ to boost asset buys by Y10 trln, to buy long-term JGBs
* Analysts say impact on dlr/yen may prove fleeting
* Moody's puts UK, France, Austria on negative outlook
* German ZEW survey eases pressure on euro
By Neal Armstrong
LONDON, Feb 14 (Reuters) - The yen fell on Tuesday as the Bank of Japan eased monetary policy by expanding its asset-buying scheme, but the impact on the currency may prove short-lived while nagging worries over the euro zone crisis keep it supported as a safe haven.
The BOJ boosted its asset buying and lending scheme by 10 trillion yen ($130 billion), to 65 trillion yen, with the entire increase to be used for purchases of long-term Japanese government bonds (JGBs).
The dollar rose to a near three-week high of 78.19 yen on trading platform EBS with gains of around 0.6 percent on the day. The euro rose 0.7 percent on the day to 103.10 yen .
"The knee-jerk reaction has been to sell the yen and that's understandable with the BoJ being a bit more active than it has been in the past," said Lee Hardman, currency strategist at BTM-UFJ.
"This certainly reinforces the recent yen-weakening trend but that trend rests on broader financial market stability remaining in place. There are still risks of a disorderly outcome in Greece which would derail current yen weakness," he added.
A rally in global equity markets this year has helped to weaken the low-yielding yen which tends to fall when risk sentiment improves. In such an environment investors typically use it as a funding currency to finance investments in higher-yielding alternatives.
One key topside level for dollar/yen in the near term lies near 78.29 yen, around its late January high and a peak hit in late November.
The dollar probed above its 200-day moving average at 78.05. A daily close above there for the first time since 2011 would be a clear positive sign. Support was back at the top of the daily Ichimoku cloud around 77.43.
"We think dollar/yen will struggle to get through the 80 yen area which has capped recent moves higher," said Lauren Rosborough, senior currency strategist at Societe Generale.
"Although the BoJ has announced another expansion, when put into context it is catching up with easing measures taken in the U.S.," she added.
EURO PARES LOSSES
The euro pared earlier losses against the dollar and hit a high of $1.3216 on EBS after a German survey of economic sentiment rose this month, defying expectations for a fall and adding to signs that the German economy is holding up in the face of the euro zone crisis.
The euro had fallen to session lows of $1.3127 after rating agency Moody's said it may cut its triple-A ratings of France, Britain and Austria while it downgraded six other European nations, including Italy.
Moody's move on euro zone sovereign ratings follows action by Standard & Poor's last month, when France and Austria lost their triple-A status while Italy, Spain, Portugal, Cyprus, Malta, Slovakia and Slovenia were downgraded.
"Anyone observing the markets had to expect further rating agency downgrades and in the end Moody's only followed S&P's previous step," said Commerzbank analysts in a note.
The euro had been down about a cent from the previous day's high on worries about the remaining hurdles Greece faces in its bid to avoid a disorderly default.
The European Union has given the fragile ruling coalition of Prime Minister Lucas Papademos until Wednesday, when euro zone finance ministers are expected to meet, to specify how 325 million euros of the 3.3 billion euros demanded in budget savings will be achieved.
By the same deadline, Greek political leaders must give a written commitment to implement the terms of the deal.
"The market is dominated by Wednesday's Eurogroup meeting and there is still huge tail risk for the euro," said Rosborough.
© Thomson Reuters 2011. All rights reserved.
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Asian Market Update: Moody's EU sovereign rating action puts markets on the defensive; BoJ announces new easing to the tune of an additional 10T

- (JP) BANK OF JAPAN (BOJ) LEAVES TARGET RATE RANGE UNCHANGED BETWEEN 0.0% TO 0.10% AS EXPECTED; EXPANDS ASSET PURCHASE FUND BY ¥10.0T to ¥65.0T; SETS 1% INFLATION TARGET
- (JP) JAPAN DEC FINAL INDUSTRIAL PRODUCTION M/M: 3.8% V 4.0% PRELIM; Y/Y: -4.3% V -4.1% PRELIM; CAPACITY UTILIZATION M/M: 3.1% V -2.9% PRELIM
- (NZ) NEW ZEALAND JAN REINZ HOUSE PRICE INDEX M/M: -1.4% V -0.1% PRIOR; Y/Y: 25.2% V 20.9% PRIOR
- (AU) AUSTRALIA JAN NAB BUSINESS CONDITIONS: +2 V 0 PRIOR; CONFIDENCE: +4 V 3 PRIOR (7-month high)
- (UK) UK JAN RICS HOUSE PRICE BALANCE: -16% V -17%E
- (NZ) NEW ZEALAND JAN QV HOUSE PRICES Y/Y: 2.7% V 2.4% PRIOR (16-month high)
- (NZ) NEW ZEALAND JAN FOOD PRICES M/M: 0.0% V 0.2% PRIOR (3-month low)
- (CN) China Jan car sales -23.8% y/y v +26.7% prior
***Markets Snapshot (as of 05:30GMT)***
- Nikkei225 +0.5%
- S&P/ASX -0.9%
- Kospi -0.2%
- Taiwan Taiex -0.4%
- Singapore Straits Times -0.1%
- Shanghai Composite -0.7%
- Hang Seng -0.1%
- S&P Futures -0.3% at 1,345
- April gold -0.4% at $1,718/oz
- March Crude -0.3% at $100.57
***Overview/Top Headlines***
- A negative tone was set for the equities markets today by Moody's action after the US close and right before the open of Australia on European sovereign ratings. The Greenback gained against the other majors as well as emerging market currencies, A$ fell 0.4% to $1.0669 while the NZ$ tested $0.8290. Moody's affirmed the EFSF. Austria, France and the UK had their AAA ratings affirmed, outlooks were cut to negative. This is the first ratings agency action on the UK, which makes it particularly notable. Moody's cut Italy by 1 notch to A2, Spain by 2 notches to A3 and Portugal one notch to Ba3 all outlook negative. In Eastern Europe Slovakia and Slovenia were both cut one notch to A2 with a negative outlook. Main drivers for the ratings action were uncertainty over EU prospects for reforms and fiscal and economic framework as well as increasingly weak macroeconomic prospects all which constrains the creditworthiness of all EU sovereigns to a varying degree. The EUR/USD fell to $1.3146 though the range for the session was about 50 pips.
- Bank of Japan as expected left the target rate unchanged at 0.0-0.1%, they announced an unexpected expansion to their asset purchase program by ¥10.0T, bringing the total to ¥65.0T. The increase will be used for JGB buying, which is similar to October action. As Japanese press speculation the BoJ did set its first official inflation target of 1%. USD/JPY extended to a 2-week high above ¥77.80 before extending to session highs of ¥77.99. EUR/JPY tested above ¥102.60. BoJ action boosted the Nikkei225 to close at its highest level since Sept. The move also saw Hong Kong and Singapore creep into positive territory. In Australia BHP and Rio Tinto fell after announce a huge expansion in Escondida copper mine in Chile. Uranium miner Paladin had a wider y/y loss in H1 results despite strong production numbers.
***Speakers/Geopolitical/In the press***
- (US) Fed's Williams: Vital to keep monetary policy throttle wide open; Need to lower unemployment and return inflation to 2.0% quickly to minimize the damage to the economy >- (CN) China Banking Regulatory Commission (CBRC) may relax new capital adequacy requirements expected to take place in 2012 to ease the balance sheet pressure - Chinese press
- (CN) Former PBOC Deputy Gov: China will not boost loans and debt in order to cure economic issues - Shanghai Securities News
- (AU) RBA Assist Gov Debelle: Next LTRO plan may ease sovereign pressure; Market uncertainty to remain for some time
- (NZ) New Zealand Dep Fin Min Joyce: Strong NZ$ is presenting a challenge but exports continue to grow
***Equities***
- Tepco, 9501.JP: Govt is threatening to withhold ¥1.0T in aide unless Tepco allows itself to be nationalized - Japanese press
- DBS.SG: China unit to increase staff in China by 25% or 2,000 people in 2012
- BHP: Reports a major reserve increase of 17% at Escondida and increase in investment; approves $2.6B increase in Escondida investment - financial press
***US Equities***
- NSIT: Reports Q4 $0.78 (incl benefit) v $0.49e, R$1.36B v $1.4Be; +14.1% after hours
- USTR: Reports Q4 $0.64(adj) v $0.63e, R$1.20B v $1.2Be
- RAX: Reports Q4 $0.18 v $0.15e, R$283M v $281Me; names Karl Pichloer as new CFO; +6.9% after hours
- LPS: Reports Q4 $0.72 v $0.58e, R$534M v $518Me; -1.2% after hours
- FIS: Reports Q4 $0.66 (adj) v $0.65e, R$1.5B v $1.5Be; -0.6% after hours
***FX/Fixed Income/Commodities***
- (AU) Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES): Revises winter wheat forecast to 29.5M, +4.2% from Dec estimate and 5.7% y/y
- (CN) PBoC sells CNY6.0B of 28-day repos at 2.8%
- SLV: iShares Silver Trust ETF daily holdings fall to 9,658 tons from 9,700 tons (first decline since Jan 25th)
***Rating Action***
- (FR) MOODY'S CUTS FRANCE OUTLOOK TO NEGATIVE FROM STABLE; AFFIRMS AAA SOVEREIGN RATING
- (UK) MOODY'S: UNITED KINGDOM OUTLOOK CUT TO NEGATIVE FROM STABLE; AFFIRMS AAA SOVEREIGN RATING
- (IT) MOODY'S: ITALY SOVEREIGN RATING CUT ONE NOTCH TO A3 FROM A2, NEGATIVE OUTLOOK
- (AT) MOODY'S: CUTS AUSTRIA SORVEREIGN OUTLOOK TO NEGATIVE FROM STABLE; AFFIRMS AAA SOVEREIGN RATING
- (ES) MOODY'S: SPAIN SOVEREIGN RATING CUT TWO NOTCHES TO A3 FROM A1, NEGATIVE OUTLOOK
- (PT) MOODY'S: PORTUGAL SOVEREIGN RATING CUT ONE NOTCH TO BA3 FROM BA2, NEGATIVE OUTLOOK
- (EU) MOODY'S AFFIRMS AAA RATING FOR EUROPEAN FINANCIAL STABILITY FACILITY (EFSF); STABLE OUTLOOK
- (SL) MOODY'S: CUTS SLOVENIA SOVEREIGN RATING ONE NOTCH TO A2 FROM A1, NEGATIVE OUTLOOK
- (SO) MOODY'S: CUTS SLOVAKIA SOVEREIGN RATING ONE NOTCH TO A2 FROM A1, NEGATIVE OUTLOOK