CPI is Up, BoJ ups rate

There are two interesting news in the market that investors as well as trader may want to pay attention to. Starting with CPI, which is the top of rank. The US consumer price index increased by 0.2% vs. 0.1% that in general economists were expecting. According to the Labor Department, this gain was led by medical care, food and tobacco prices. CPI, in my opinion, whenever it beats the forecast, is a double edge sword. If it’s good, means economy is good and strong which means chances of interest rate cuts are lower or vice versa. Bottom line, as soon as the news was out, the market futures started to drift lower and one can expect the market to open lower. Well, good for my RUT Iron Condor as I am short 8.4 delta. 

Other news that sometime doesn’t get big attention is the rate increase by bank of Japan. Whenever BoJ increases the rate, I personally pay a little more attention. My hypothesis (I didn’t get time to find data to support this) is that borrowing from Japan and investing in emerging markets (or any other appropriate risk/reward market) is profitable and some of the hedge funds might be practicing this profitable method. When BoJ increase the rate, the borrowing cost also increase (though partially) which may see funds pullback from these “profitable” markets and may bring those down. How sustainable or how long that is, something to be watchful. I shall surely share when I get some data on it. But one may want to watch out emerging markets especially BRIC in the coming days.  Keep a close eye, there are some wonderful opportunities, 

Profitable trading, OptionPundit






One response to “CPI is Up, BoJ ups rate”

  1. […] De Javu, it’s yen again. First I talked about Yen in February here. Yen and China GDP are the two factors that are attributed to the major falls in Asia today. Yen rose vs dollars yesterday and exporters, including SONY, were sold off at Nikkei. At one time Nikkei was down over 400 points before closing 295 points down or 1.67% lower. […]

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