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Forex News February 04, 2022

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Japan

In the case of a Russian invasion of Ukraine, the Japanese government is considering redirecting some gas supply to Europe.

According to knowledgeable sources, the Japanese government is considering diverting certain quantities of imported liquefied national gas to Europe in order to prepare for a suspension of gas supply to the area in the case of a Russian invasion of Ukraine.

According to the sources, they are reacting to an approach by the administration of US President Joe Biden. Plans for contingencies are being developed.

According to BOJ Governor Kuroda, Japanese consumer inflation is lower than in the United States and Europe.

  • According to Bank of Japan Governor Kuroda, even when one-time variables are excluded, Japan’s consumer inflation is lower than that of the United States and Europe.
  • It is difficult for inflation to reach 2% unless wages rise in tandem with prices;
  • The main reason for Japan’s weak price growth is that households and firms act on the assumption that prices will not rise much;
  • It is critical to maintain strong monetary easing to support the economy, generate wage and price growth; and
  • The BOJ acknowledges that buying ETFs is an extraordinary monetary policy set that no other central bank conducts. 
  • The Bank of Japan’s ETF purchases have had some effect in calming markets when investors become overly risk apprehensive. • The BOJ only buys ETFS when markets become overly risk averse, and refrains from purchases otherwise.

US futures

• Amazon results help to tilt the scales back in the other direction as US futures rise ahead of European trade

• S&P 500 futures are up 1.1 percent; Nasdaq futures are up 2.0 percent; and Dow futures are up 0.5 percent.

The gains here aren’t as significant as the decrease from yesterday, when the Nasdaq had its lowest day since October 2020. More hawkish central bank sentiment added to the bearish undercurrents in tech stocks as the ‘Meta-reverse’:

However, after the close, Amazon reported record revenue, which is providing some respite to the market and risk trades for the time being.

Just keep in mind that we still have the US non-farm payrolls report to contend with later in the week, which will be another significant risk event for investors to handle before the weekend.

Oil

  • Oil continues to impress as the rally gains traction.
  • WTI is trading above $90, its highest level since October 2014
  • Technically, it is difficult to dispute with the upward momentum. The reversal yesterday, in particular, was remarkable. WTI crude fell as low as $86.77 before recovering to end slightly above $90, a critical psychological threshold. The news regarding Russia and Ukraine may have aided the rally, but it is difficult to go against the trend at this point. The only thing I’d be concerned about is that this week’s increases would be oil’s eighth in a row, which is quite a stretch.
  • Not to mention the magnitude of the relocation. The streak of gains in this case began when the price was less than $70. This is an almost 30 percent increase in prices since the start of the surge. Once geopolitical tensions between Russia and Ukraine subside, that may be an excellent ‘excuse’ for traders to draw back on long positions. That might be the point at which oil hits a bit of an air pocket and ultimately encounters a correction following the current surge.

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