Forex Fundamentals

Reports show that Japan’s economy probably emerged from its third recession in five years last quarter as cold weather boosted consumption, bolstering Prime Minister Shinzo Abe’s campaign to revive growth. The yen gained against most major partners to trade at 92.94 before a Group of 20 meeting where leaders are expected to debate the currency’s recent declines. The US has indirectly backed the moves of the BoJ saying that central banks and governments need to use whatever weapons available to turn their economies around. The G7 issued a statement yesterday saying that they do not believe that there is or will be a currency war helping to relieve market tensions as the euro trades a bit firmer but in a tight range near the 1.3450 range after tumbling to trade in the 1.33 range earlier this week. Spain’s government plans to negotiate the pace of its budget cuts to ensure the economic slump doesn’t deepen after Prime Minister Mariano Rajoy said the nation made “unprecedented” efforts in 2012. The pound remains weak ahead of the Bank of England announcements today, as markets expect a negative outlook and some downgrades to forecast. The GBP is trading at 1.5683

The marquee event yesterday was President Obama’s State of the Union message which focused on the economy, jobs and upcoming spending and budget cuts. President Barack Obama has pledged in his annual State of the Union speech to revive the sluggish US economy by creating “good, middle-class jobs”. The Democratic president promised “smarter” rather than bigger government for “the many, and not just the few”. He also called for efforts to reduce gun violence and urged bipartisan immigration reform. He promised new infrastructure projects and an increase in the minimum wage. There has been very little reaction to his address.

Job openings in the U.S. dropped in December from a four-year high, a sign employers put expansion plans on hold  as lawmakers wrangled over tax and spending programs.  U.S. House leaders plan to take up a measure to fund the government for the rest of the fiscal year that would reduce spending levels below $1 trillion, according to two Republican aides. Prices for single-family homes climbed in almost 88 percent of U.S. cities in the fourth quarter as the housing recovery broadened. The median sales price rose from a year earlier in 133 of 152 metropolitan areas measured.

In a big surprise yesterday, the U.S. government posted a January budget surplus for the first time in five years, reflecting higher revenue from payroll and individual income taxes. Receipts exceeded outlays by $2.88 billion, compared with a $27.4 billion deficit in January 2012.

Across the globe, Australian consumer confidence surged by the most since September 2011 as central bank interest-rate reductions begin to gain traction, a private survey showed. The sentiment index for February jumped 7.7 percent to 108.3 helping the AUD to climb to 1.0346.

This morning news flows are centered on the North Korean nuclear test and sanctions that will most likely be supported by China, as China shows their dismay with the North Korean leader ignoring warning from the Chinese about conducting nuclear test.