Month: January 2012

Following are some of the key quotes from the central banks that announced monetary policy decisions over the past week:

• European Central Bank (held rate at 1.00%): “Inflation is likely to stay above 2% for several months to come, before declining to below 2%. At the same time, the underlying pace of monetary expansion remains moderate. As expected, ongoing financial market tensions continue to dampen economic activity in the euro area, while, according to some recent survey indicators, there are tentative signs of a stabilisation in activity at low levels. The economic outlook remains subject to high uncertainty and substantial downside risks. In such an environment, cost, wage and price pressures in the euro area should remain modest and inflation rates should develop in line with price stability over the policy-relevant horizon.”
• Banco Central de Chile (dropped rate 25bps to 5.00%): “Domestically, output and demand have evolved in line with forecasts in the latest Monetary Policy Report. The labor market is still tight. The money market has normalized, while financing conditions for some agents are tighter than a few months ago. December’s headline and core inflation was higher than expected due to the prices of perishables and other foods and the lagged incidence of the peso depreciation in the fourth quarter of 2011. Inflation expectations remain near the target.”
• Bank Indonesia (held rate at 6.00%): “Board of Governors views that current BI rate is still consistent with inflation targets, financial system stability, and remains conducive to propel domestic economic expansion amidst global economic uncertainty. In 2011, Indonesian economy showed strong performance with low inflation, higher economic growth, stable exchange rate, and stable financial system. The achievement was supported by various policies implemented by Bank Indonesia and the government.”
• Bank of Korea (held rate at 3.25%): “In Korea, exports have kept up their steady increase, but domestic demand has been subdued with consumption and construction investment decreasing from the previous month. On the employment front, the number of persons employed has sustained its large scale of increase, led by the private sector. The Committee anticipates that domestic economic growth will gradually return to its long-term trend level going forward, after remaining subdued for some time due mostly to the impact of external risk factors.”
• National Bank of Poland (held rate at 4.50%): “In the opinion of the Council, in the medium term inflation will be curbed by gradually decelerating domestic demand amidst fiscal tightening, including reduced public investment spending, and interest rate increases implemented in the first half of 2011, as well as the expected global economic slowdown. The impact  of the situation in the global financial markets on zloty exchange rate together with a possible rise in commodity prices continues to be an upside risk to domestic price developments.”

Looking at the central bank calendar, the week ahead is largely dominated by emerging market central bank action. However it is likely that only Brazil will make a move, likely cutting another 50 basis points. But these banks will likely be wary of the external environment, particularly financial market stress emanating from the Eurozone. Elsewhere the European Central Bank will release its monthly report on Thursday.

France was informed it has lost its AAA credit rating from Standard and Poor’s, according to the country’s finance minister, amid rampant speculation S&P is set to downgrade several members of the 17-country euro zone.

Source: ForexYard

The euro turned overwhelmingly bearish today, following an Italian debt auction that highlighted how fragile the euro-zone situation is. The debt auction failed to match the positive results of Thursday’s Spanish bond sale, and led to investors once again abandoning the common currency in favor of safe-havens like the Japanese yen and US dollar. The EUR/USD tumbled to just above the 1.2600 level, while the EUR/JPY approached the 11-year low reached earlier this week.

With the euro-zone still far off from any kind of solution to the current crisis, analysts are warning that the euro is unlikely to stage a meaningful correction in the near future. Next week, traders will want to pay attention to any announcements regarding the current state of the euro-zone, with any negative comments likely to bring the currency down further. Specifically, news about Greece or Italy are likely to cause the currency to slide further.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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Techcrunch reported that at the Consumer Electronics Show, eBay (NASDAQ:EBAY) CEO John Donahoe forecast that eBay would reach $8 billion in mobile gross merchandise volume, and that PayPal will reach $7 billion in transactions, this year.eBay (NASDAQ:EBAY) has potential upside of 22.1% based on a current price of $31.64 and an average consensus analyst price target of $38.64.eBay is currently above its 50-day moving average (MA) of $30.63 and above its 200-day of $31.20.

The Central Bank of the Islamic Republic of Iran is reported to have decided to raise interest rates to stabilize its gold and currency markets.  Bloomberg cited IRNA quote from Kazem Delkhosh (and central bank official) “The council has decided to fix the rates for bank deposits at a rate higher than inflation”.  Meanwhile financial blog Zero Hedge reported that Iran’s central bank had raised rates to 20%, citing EA World View: “The effort is to reduce the flow of cash in the economy, but the official says it will increase capital investment by banks in an “impressive market”.”  According to Bloomberg Iran’s inflation rate is currently 20.6% (compared to a reading of 12.5% in the year ending March 2011).

The Central Bank of Armenia held its key refinancing rate unchanged at 8.00%.  The Central Bank Board said in its release: “The Board admitted that inflationary pressures coming in to the Armenian economy from external environment in short run are weak: international prices of raw materials and food products fell in December in view of the slowing of the world economy. Nevertheless, world economic developments and possible inflationary pressures therefrom are in the focus of the Central Bank. Inflationary pressures from domestic economic developments are at their smallest as the impact of the fiscal policy and private spending as well as the developments in the labor market on the inflation environment are estimated to be neutral.”

Previously the Bank cut the reference rate by 50 basis points at its September meeting in 2011, after last raising the refi rate by 25 basis points to 8.50% in April last year.  Armenia reported annual inflation of 2.5% in December, down from 4.8% in November, the same as 4.8% in August; down from the higher figures seen earlier last year e.g. 9% in May, and 11.5% in March, yet still within the inflation target range of 2.5%-5.5%.  Armenia’s currency, the Armenian Dram (AMD), last traded around 388 against the US dollar.

In trading on Friday, auto dealerships shares were relative leaders, down on the day by about 0.1%. Leading the group were shares of Asbury Automotive Group (ABG), up about 2.8% and shares of Penske Automotive Group (PAG) up about 1.7% on the day.

JP Morgan (NYSE:JPM) is scheduled to report Q4 results on Friday before the market open, with a conference call scheduled for 9 am ET. Analysts are looking for EPS of $0.91 on revenue of $23.05 billion.According to First Call, the consensus range is $0.76-$1.00 for EPS and $21.08 billion-$24.17 billion for revenue.Loan growth, signs of stabilization and even progress in the U.S. housing market, and improved consumer credit trends are among the tailwinds, while continued uncertainty in the euro zone and generally declining net interest margins are among the headwinds, according to a number of analysts.Meanwhile, on January 10 Bernstein predicted that macro headwinds would have to diminish further before bank stocks could generate a sustained rally.JPMorgan Chase (NYSE:JPM) has potential upside of 26.9% based on a current price of $36.56 and an average consensus analyst price target of $46.39.

The Central Reserve Bank of Peru kept its monetary policy reference rate steady at 4.25%.  The Bank said: “This decision takes into account the lower growth being recorded by some components of expenditure, the current international financial risks, and the rise of inflation associated mainly with temporary supply factors. Future adjustments in the reference interest rate will depend on the evolution of inflation and its determinants.”

Peru’s central bank also held the interest rate at 4.25% at its November meeting, while the bank last raised the monetary policy reference rate by 25 basis points to 4.25% in May last year.  Peru reported annual inflation of 4.74% in December, up from 4.2% in October, up from 3.73% in September, 3.35% in August and July, and compared to 2.9% in June, 3.07% in May, 3.34% in April, and above the Bank’s 1-3% inflation target.  

The Bank of Mozambique held its standing facility lending interest rate unchanged at 15.00%.  The Bank also held the required reserve ratio unchanged at 8.5%.  The Bank said [translated]: “In what was the first regular session of 2012, the CPMO noted the main macroeconomic results achieved in 2011, with emphasis on the inflation and international reserves resulting from the contribution of the partner institutions of macroeconomic management, economic operators and the general public, in pursuing the objective of preserving price stability.”

Previously the Bank cut the interest rate 25 basis points, and RRR by 25 basis points at its December meeting, and last cut the key lending rate by 50bps to 16.00% at its August meeting, after raising the rate by 100 basis points to 16.5% at its January meeting last year, where it also raised the interest rate paid on deposits by 100 basis points to 5%, and lifted the required reserve rate by 25 basis points to 9%.  

Mozambique saw inflation in it’s largest city, Maputo, of 7.7% in November, down from 8.3% in October, 7.8% in September, 7.9% in August, 7.7% in July, and lower than 9.3% in June.  Mozambique’s economy expanded 6.8% in the June quarter, compared to GDP growth of 8.1% in the March quarter.  The Bank noted macroeconomic targets for 2012 of GDP growth of 7.5% and inflation of 5.6%.  

Mozambique’s currency, the Metical (MZN) last traded around 27.26 against the US dollar, and according to Bloomberg the Metical had gained about 22 percent against the US dollar in 2012, making it one of the best performing currencies.