Risk trends were on the move again Tuesday morning.
The highly visible credit crunch was fed by a number of reports today that both added to concerns that the crisis will deepen and conversely that conditions are improving. Suggesting things will only get worse before they get any better, the IMF produced its most in-depth report of the financial market crisis since it began last summer. In the report, the lender projected total losses from the sub-prime-borne crisis could cost financial institutions as much as $945 billion – well beyond the current level of writedowns already reported by the banking industry. Officials at the IMF suggested that the world’s banks should disclose all looming write downs and once again called for a coordinated effort by central banks to stamp out the credit crisis once and for all. On the other side of the coin, the Fed made another $50 billion injection through its auction facility and Washington Mutual was able to raise $7 billion in a market that is still very risk adverse. Despite these reports though, USDJPY was pushed even further into a technical wedge that begs for a breakout. Looking ahead, a BoJ rate decision is on tap; but considering the instability in the group’s ranks and the muddy Japanese fundamentals, there is little chance for a change in policy.