Recap 2-23-12

Main Items:

• US Initial Jobless Claims increased marginally to 351k last week vs 355k exp and 348k prev
• A new report, slated for release this Mon and prepared by the WTO and an influential Chinese think tank, warns of the risk of an economic crisis unless Beijing implements significant reforms, including scaling back its giant state-owned enterprises and forcing companies to operate more like private commercial firms. The report talks about the “middle-income trap” whereby EM countries experience sharp growth decelerations once income hits a certain level. -WSJ

Overseas:

• German IFO Business Climate Index improved to 09.6 in Feb vs 108.8 exp and 108.3 prev

Upcoming Data:

• German GDP, UK GDP, South Korea Business Survey

Commentary:

Who needs smart phones when you can wear augmented glasses instead?
http://bits.blogs.nytimes.com/2012/02/21/google-to-sell-terminator-style-glasses-by-years-end/
Looks wicked cool. Is it the next stage of technological evolution and privacy concerns?

Separately, there are some who believe that last week’s BoJ action will continue to weaken the Yen substantially from here. The chart below suggests that isn’t the case. $Yen is in white, BoJ holdings of Japanese Government Securities is in yellow, BoJ interventions in the FX market is in purple, and aggregate BoJ holdings of US treasuries is in red.

The conclusions are clear:
1) Over the past 10 years (since the BoJ first cut rates to 0) increases in BoJ purchases of JGB’s have had a minimal effect on USDJPY.
2) Japanese interventions in the FX market have also had a minimal impact on USDJPY
3) A more substantial move in the Yen crosses requires either different policies, or at least a very substantial upsizing of current policies. Neither appears to be in the cards.
4) Technically, USDJPY is at a multi-month resistance level and also at the most overbought level in several years. Shorting USDJPY here looks like an interesting bet.