Financial markets are rather steady in the Asian session today. The Japanese Nikkei opened lower but quickly recovered back to above 15000 handle. Other major equity indices flip-flopped between gain and loss in tight range. Overnight, US equities also tread water with DOW ending -27.5 pts lower. The S&P 500 faced some selling pressure from below record high and closed slightly lower by -2.5 pts. In the currency markets, all major pairs and crosses are still stuck in prior week's range without any direction. The GBP/USD had a rally attempt yesterday but struggled to take out 1.6725 minor resistance. The EUR/USD is bounded in tight range below 1.3772 temporary top. And, the USD/JPY is hovering around a flat 4 hours 55 EMA in choppy sideway trading.
In the US, Fed governor Taurallo warned of modestly increased risks in credit markets. He noted that "high-yield corporate bond and leveraged loan funds, for instance, have seen strong inflows, reflecting greater investor appetite for risky corporate credit, while underwriting standards have deteriorated, raising the possibility of large losses going forward." He said, "monetary policy action cannot be taken off the table as a response to the build-up of broad and sustained systemic risk." But, at this point, Taurallo didn't think Fed is "confronted with a situation that would warrant a change in the monetary policy we have been pursuing."
In Japan, the BoJ governor Kuroda told the parliament that the economy is on track to achieve the 2% inflation target. He noted prices have risen in a broader range of products with output gap narrowing. He noted the Japanese economy is making steady progress and the effect of BoJ's policies are steadily emerging. In a press interview after the G20 meeting, Kuroda said until Japan reaches a 2% inflation sustained in a table way, BoJ would continue with QQE, quantitative and qualitative easing. He expected Japan and Europe to have "very accommodative" monetary policy ahead and that would "mitigate the impact of the Fed’s action on capital flow in that sense."
Yesterday, the European commission raised Eurozone's 2014 growth forecast to 1.2%, up from November's projection of 1.1%. For 2015, growth is projected to accelerate to 1.8%, versus prior forecast of 1.7%. Unemployment rate is expected to drop back to 12.0% and further improvement would be seen in 2015 to 11.7%. Regarding inflation, EC, projected eurozone CPI to be at 1.0% in 2014 and 1.3% 2015. That is, inflation is expected to stay well below ECB's target of 2% within the forecast horizon.
Looking ahead, German Gfk consumer sentiment, Swiss UBS consumption indicator, UK GDP and index of services will be featured in European session. US will release new home sales.