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European Central Bank President Mario Draghi said on Friday that euro area recovery is gradually taking place and there is no threat of deflation in the region.

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New home sales in the U.S. fell by much more than anticipated in the month of December, according to a report released by the Commerce Department on Monday, with sales pulling back further off the five-year high set in October.

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BitInstant CEO Charlie Shrem Arrested for Alleged Money Laundering

The Bitcoin bigshot was arrested at John F. Kennedy airport in New York City Monday

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Charles Shrem, who ran a New York-based Bitcoin exchange, was arrested Monday and charged with engaging in a money laundering scheme with a user of Silk Road, the notorious deep web black market.

In the federal criminal complaint, the Southern District of New York charges Shrem, the 24-year-old CEO of BitInstant, with three counts, including one count operating an unlicensed money transmitting business, one count of money laundering conspiracy and one count willful failure to file suspicious activity report. Robert Faiella, a Silk Road user who operated under the name “BTCKing,” was charged with one count of operating an unlicensed money transmitting business and one count money laundering conspiracy.

The complaint alleges that Faiella took orders from Silk Road users hoping to purchase Bitcoin, the anonymous peer-to-peer crypto-currency. Shrem then filled the orders by transferring funds into an account controlled by Faiella and hosted on a third-party Japan-based Bitcoin exchange. Together the two allegedly sold over $1 million in Bitcoin to Silk Road users, who then used those Bitcoins to attempt to purchase anonymously drugs and other illegal goods from the deep web black market.

Consumer confidence in the U.S. improved for the second consecutive month in January, according to a report released by the Conference Board on Tuesday, with the consumer confidence index rising by more than expected during the month.

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How the US Economy Changed Since December FOMC Meeting

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How the New Zealand Economy Changed Since December RBNZ Meeting

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Asian Shares rally, reassured By Turkish Rate Hike

(Reuters) - Asian markets rallied on Wednesday after Turkey stunned investors with a huge hike in interest rates, stirring hopes the drastic action would short-circuit a vicious cycle of selling in emerging markets and revive risk appetite generally.

The bold move even managed to overshadow the U.S. Federal Reserve's meeting at which it is widely expected to trim its asset buying program by another $10 billion a month. <TOP/CEN>

S&P 500 e-mini futures climbed 0.5 percent and Japan's Nikkei .N225 jumped 1.7 percent as safe havens such as the yen and gold all eased. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS bounced 0.5 percent after three sessions of falls.

Turkey followed India by tightening policy at a midnight meeting of its central bank, with a huge hike of 425 basis points taking the overnight lending rate all the way to 12 percent.

"Desperate times call for desperate measures, this is a confidence-saving measure," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

"It will definitely hurt but it might be enough to stem the bleeding. It looks like the lira acted positively, whether it lasts is anyone's question."

Early signs were that it might be enough to stem the rout in the Turkish lira which surged to 2.1870 per dollar, and away from Monday's historic low of 2.39. Turnover was very high for Asian hours, where the currency is rarely traded.

More emerging market central banks are expected to take steps to quell a mix of inflationary pressures at home and a flight of capital abroad. South Africa's central bank holds its policy meeting on Wednesday.

FED STILL AHEAD

Just the prospect of action had helped stabilize stock markets across the globe after several days of hectic selling. The MSCI emerging equity index .MSCIEF edged up 0.4 percent from a 4-1/2 month low.

On Wall Street, the Dow .DJI ended Tuesday with gains of 0.57 percent, while the S&P 500 .SPX rose 0.61 percent.

The calmer tone was reflected in the market's favored measure of volatility, the VIX index, which .VIX dropped over 9.0 percent on Tuesday to 15.80 and off a peak of 18.99.

Currencies leveraged to commodity prices and global economic growth benefited from the better mood. Also helping was surprising strength in industrial production in South Korea, an antidote to recent softness in Chinese data.

The Australian dollar rose a third of a U.S. cent to $0.8800 in the wake of the news from Turkey. The Aussie is often used as a proxy for hedging against stress in less liquid emerging markets. Currencies from South Korea to Indonesia and Malaysia all started firmer.

Going the other way, the safe-haven yen gave up some of its recent gains as the dollar advanced to 103.25 yen from a seven-week trough of 101.71 touched at the start of the week.

Emerging markets could still be vulnerable to whatever the Fed decides on policy. The reduction of U.S. stimulus, combined with the resulting higher bond yields, is one reason funds have been switching money back to the developed world.

Yet many investors seem to have made peace with a steady pullback in asset-buying given it is balanced with a commitment to keeping rates near zero for a long time to come.

Benchmark 10-year Treasury yields, for instance,

have steadied at 2.77 percent compared to a peak of 3.04 percent at the start of the month.

In commodity markets, gold lapsed to $1,252.70 an ounce to be well off Monday's high of $1,278.01.

U.S. crude edged back 29 cents to $97.12 having hit its highest so far this year on expectations that supplies were dwindling at the contract's benchmark delivery point. Brent crude had added 76 cents to $107.45 a barrel on Tuesday.

An index monitoring manufacturing activity in China showed contraction in January, the latest PMI from HSBC and Markit Economics revealed on Thursday, coming in with a score of 49.5.

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Turkey Shocks Forex Market As Fed Decision Looms


This year was always going to be about the central banks and their interest rate decisions. So far, no asset class can be disappointed, because tagging along with central bank decisions is volatility, a word that could not be applied to the foreign exchange (forex market) over the past 18-months. With mirrored monetary policies, central banks had managed to handcuff the forex market, deadening volatility and opportunity. But in early 2014 that’s all changed; volatility is back with a vengeance, bringing trading opportunities with it. There never was going to be a “follow thy leader campaign” – that was yesteryear. Rate divergence is the name of the new game and the mighty dollar is expected to benefit greatly from it before this year ends.

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The emerging markets (EM) fallout is making it interesting for capital markets. EM currencies, including Argentina’s peso (ARS) and India’s rupee (INR), have been under pressure from expectations that the Federal Reserve and the Bank of England would pull back on their stimulus measures. Previously, developed quantitative easing had been driving inflows to developing economies, in turn financing these countries’ aggressive growth, which led to an obvious side effect: inflation. EM central banks need to be belligerent when combatting rampant inflation and Turkey’s central bank is certainly following that mantra, flexing its muscle overnight by raising the nation’s lending rate by +425-bps, from +7.75% to +12%. Turkey now joins India and Brazil by implementing stronger-than-expected policy tightening measures; and pledging to maintain that policy until there is a clear improvement in the inflation outlook.

Turkey is in Trouble

Is Turkey’s stunning move to curb inflation and prevent disorderly outflows going to be short-lived? Watching the JPY and CHF back in demand during this morning’s European session would suggest the safe haven play is currently dominating. This is in contrast to the increased risk taking that transpired throughout the Asian session overnight. The TRY is in danger of wiping out its post-rate hike gains. USD/TRY fell from around $2.25 to $2.1635 in the wake of the central bank action, and it is now back up to $2.23. However, if the market believes that the Turkish central bank has now gotten ahead of the curve, and it’s ready to deploy all of its tools to fight inflation, it should be capable of restoring some confidence in the TRY. Investors can expect global policymakers to collectively talk up the EM region as well. Obviously, the downside to Turkey’s actions is that being too aggressive does create potential problems for domestic economic growth, and it can put unwanted pressure on Turkish bonds and equities.

Turkey’s aggressive hike is good for markets, but if the Fed also hiked its rates, it would be deemed detrimental. The Fed is now in focus and consensus believes that a Turkish rate hike will do nothing to sway U.S. policymakers later today. Even yesterday’s dismal U.S. durable goods headline (-4.3%) is not expected to distract anyone at the Fed. The Federal Open Market Committee is on course to follow through with tapering the Fed’s monthly asset purchases at a “measured pace.” Last month, a token taper of $10-billion was initiated and there is no evidence to suggest that Chairman, Ben Bernanke, and company will be deviating from that game plan this afternoon. The December durable goods report was much weaker-than-expected, almost across the board, and the prior November numbers were all revised lower. Last month’s shortfall was broad-based and the biggest drop in five months.

The Bernanke Era Draws to a Close

The fixed-income dealers are beginning to lean on the supply factor argument on tapering. Dealers are maintaining that the Fed needs to taper because the Treasury is tapering. With the U.S. budget deficit narrowing there has been a drop off in debt product supply at some note auctions of late. On the flipside, less product supply is managing to artificially keep Treasury yields in check, especially after last year’s pop in yields. Combine this with China’s and Japan’s record-holding of U.S. Treasurys, and it will continue to benefit both the American consumer and businesses by keeping interest rates at agreeable levels.

With severe winter weather inhibiting home shopping across much of the U.S., the National Association of Realtors released a report on Thursday showing a sharp drop in pending home sales in the month of December.

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2013-02-03 00:30 GMT (or 01:30 MQ MT5 time) | [AUD - Building Approvals]

• past data is -0.3%
• forecast data is 0%
• actual data is -2.9% according to the latest press release

if actual > forecast = good for currency (for AUD in our case)

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The total number of building permits issued in Australia in December was down a seasonally adjusted 2.9 percent on month in December, the Australian Bureau of Statistics said on Monday, standing at 16,141 and falling for the third straight month.

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