China is not to be seen as the â€˜savior of last resort,â€™ especially from Europeâ€™s perspective. With sleight of hand and change in Chinese dynamics, has the optimist retreating from field of play in the overnight session, in this rate and employment filled week. The ability of China to support the â€œcompromised global economic and financial systemâ€ is being tested.
Despite the initially EUR positive effects of last weeks LTRO operation, commodity currencies have been amongst the weakest currencies trading since Friday. The LTRO operation should have been a risk positive rather than a risk negative event. However, the market remains uneasy over Greece, as the deadline to make a decision about the Greek bond exchange this Thursday for investors approaches. The growth sensitive currencies have also retreated in response to the Chinese government’s lower growth targets.
China’s Premier has announced his government is targeting only +7.5% GDP growth this year. This marks the first time in eight-years that the Politburo has targeted less than +8% growth. This would suggest that China â€œis not planning for large policy stimulus with the government acknowledging a slower growth path.â€ Also, policy makers are aiming for inflation of about +4%, unchanged from last years objective.
Most of the major Central Banks will deliver their monetary policy decisions this week. No surprises are expected. The market is looking forward to a quiet ECB meeting Thursday, most likely to be overshadowed by Greek Bond decisions. Some analysts anticipate that President Draghi may provide some indication on the prospects for more LTRO operations going forward. Do not expect this to have an influence on risk attitude. The light data week in Europe will be eclipsed by NFP this Friday. The market is looking forward to its third consecutive print above +200k and strong details. If on the nose, then regional risk uptake is favored.
Euro data this morning has been capable of dragging the EUR off its Chinese Wen lows. Euro-zone retail sales rose for the first time in five months in January (+0.3%), however, the pick up was not broad based. Beating expectations has allowed the single currency temporary relief and supports a quiet ECB meet this week. Euro consumers, just like the rest of us, have been pressurized by unemployment, little wage growth and higher fuel prices. This would suggest that the surprising uptick was influenced by deep-discounting and therefore may prove short lived!
However, overall signs for a risk rally this morning just do not seem to be shaping up. Service PMIâ€™s were poor, stocks continue to bleed and Euro periphery bond yields remain elevated. Certainly not the ideal situation to be buying risk just yet. It seems that the market remains more comfortable selling on rallies!
Yen To Go 
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