Japan to Avoid 'Deep' Slowdown, Says Shirakawa

[DailyFx]

Fundamental Headlines

• Bond Market Flashes Caution Signals for Stocks – Wall Street Journal
• Fannie, Freddie Woes Vex Experts And Leave U.S. Hard Choices – Wall Street Journal
• KDB Warned Against Buying Lehman – Financial Times
• Libor Signals Tighter Credit as Banks Balk at Lending – Bloomberg
• Bernanke, Buiter, Draghi Diverge on How to Forestall Crises – Bloomberg

· NZDUSD – New Zealand food prices rose 0.6% from 1.3% in June. A breakdown of the report showed that fruits and vegetables were the main driver behind the increase in prices, with lettuce rising 32.4%, while cucumber rose 27.9%. Higher food costs may add to upside inflation risks for the New Zealand economy, but will continue to sap purchasing power for consumers as inflation remains well above the Reserve Bank of New Zealand’s target. For more news and resources, visit our New Zealand Dollar Currency Room.

· USDJPY–Bank of Japan Governor Shirakawa said that the low interest rate should help the world’s second largest economy avoid a ‘deep’ slowdown, and went on to say that the ‘accommodative environment for corporate finance is expected to continue to support business activity.’ The central bank governor also said that upside inflation risks remain dormant as wage growth remains ‘relatively weak,’ and expects inflation to peak in the coming months as commodity prices level off. The central bank is expected to hold a neutral policy stance as the economy faces both growth and inflation risks, and may continue to sit on the sidelines for the remainder of 2008. Discuss this and your trade ideas in the USD/JPY Forum.