As we mentioned on Tuesday, the bulk of the leading contestants were trading GBP/JPY, and this is precisely how contestant number 1 made over 71 percent in a single day, bringing his currency portfolio balance up to $201,054.35. Likewise, contestants 2, 4, and 5 have had good luck with both GBP/JPY and EUR/JPY. However, with the US stock markets testing key support levels, there is potential for the Japanese yen crosses to break lower. Indeed, we've seen that the correlation between the Dow Jones Industrial Average and USD/JPY is near its highest levels in at least 20 years, as both are considered to be risky assets that gain when risk appetite improves, and fall amidst flight-to-quality.
Here are the key indicators that could move the markets over the next 24 hours:
Asian Trading Session
11/20, 23:00 ET
Bank of Japan's Rate Decision - The Bank of Japan was one of the least-followed central banks around just a few months ago, but given their surprise 20bp rate cut last month to 0.30 percent, the BOJ now has the market's attention. Tonight, the BOJ is expected to leave rates unchanged, but it will be important to get a sense of what the Monetary Policy Committee expects for growth and inflation going forward. Bearish investors are betting that many central banks will move towards Zero Interest Rate Policy (ZIRP) in coming months, a policy Japan implemented in the 1990's and essentially stuck with until July 2006. This speculation has only been exacerbated by the Swiss National Bank's surprise 100bp rate cut to 1.00 percent on Thursday morning, as the SNB was not even scheduled to meet again until December following their participation in the October 8 coordinated rate cuts with the Federal Reserve and European Central Bank, among others. If global rates are indeed moving towards zero, Japan would logically be the first to get there once again since rates are already extremely low at 0.30 percent.
European Trading Session
11/21, 5:00 ET
Euro-zone Manufacturing, Services PMI (NOV A) - The Purchasing Managers' Index (PMI) readings for the Euro-zone's manufacturing and services sectors are forecasted to hold below 50 - signaling a contraction in business activity - for the sixth straight month. Euro-zone GDP figures have already signaled a recession for the region, as GDP fell 0.2 percent during Q2 and Q3. As a result, these PMI results will provide a gauge as to the depth of this recession, and may suggest that the initial Q3 GDP reading maybe be revised even lower on December 4.
US Trading Session
11/21, 7:00 ET
Canadian Consumer Price Index (OCT) - Canadian CPI for the month of October is anticipated to fall by the most since April 2003 are a rate of 0.6 percent during the month while the annualized pace is forecasted to slip to a four-month low of 3.1 percent. On the other hand, the Bank of Canada’s core CPI measure may actually rise to 1.9 percent from 1.7 percent. Given the sharp drop in commodity prices since the summer, there is potential for weaker-than-expected readings. This may be particularly market-moving for the Canadian dollar, as the Bank of Canada is viewed as being one of the more neutral central banks. That said, Credit Suisse overnight index swaps are fully pricing in a 25bp rate cut by the BOC on December 9, but could quickly shift to price in a 50bp reduction if CPI falls more than forecasted and thus lead the Canadian dollar lower.