Today had mixed results for us:
1.) As expected, the NZD fell today after inflation was weaker than expected. Inflation declined 0.5% quarter on quarter.
Resulting in renewed sentiment that the RBNZ will have to cut rates further , contrary to Wheelers comments after the last
cut. Expect NZD softness to persist for the time being.
2.) More positive UK data today showed that unemployment has fallen to 2006 levels. This in combination with inflation
being better than expected yesterday re-affirms my conviction that the UK economy will outperform the market this year,
much like the US did last year. Naturally the market is panicking today (will get to this in a moment) and nervous markets
ignore fundamentals, but the data exists to prove that the economy is in a MUCH better position than believed last week. I
was considering cutting our GBP positions if today’s data dissapointed, but today’s data reinforces my belief that these
positions will do well and I am now more determined to hold them. As I wrote yesterday though, i did not expect good news
to have an effect today following Carney’s contradictions yesterday that have everyone confused. Literally.
3.) Why is the market panicking today? Well oil keeps hitting new lows and is pulling equities with it and in addition we
had some terror attacks take place in Pakistan. This makes people turn to the haven JPY. Can not really see this lasting
for ever and feel that we are near the bottom and this is a phase like in August. With ever major economy reporting
improving employment and GDP (except Japan), I refuse to believe that we are in a recession, just a temporary crisis. To
that effect I purchased for us 300,000 units of USDJPY on Hotforex at 116.80 today with a target of 123 in Q1 2016. I
believe fundamentally that this trade works, and many of the large institutions forecast similar results (those of you who
follow me on twitter would have seen the photo i uploaded earlier from my Bloomberg terminal.) It is highly possible that
on the 28th of this month, the BOJ increases stimulus. Their strong Yen is killing Japanese exports to the Eurozone and
elsewhere and the Japanese know it. Earlier today, officials made comments that they are watching the exchange rate and
will not hesitate to act.
For now, I intent to soldier on, try to survive this temporary turmoil and hope to profit when the market stops acting
like a scared child and risk appetite returns. I really hope it passes sooner rather than later, so I can actually not
dread looking at my balances every morning.
In the next 30 mins, we await inflation data from the US which will be crucial to determining whether a March move by the
FED is on the cards or not. Given strong employment, I feel that slightly positive data today will give the fed incentive to raise rates a second time,