Tag Archives: economic stimulus

Dollar Rises on Anticipation of FOMC Minutes Release

The Fed is playing a central role again this week in the global currency exchange as traders await the release of the minutes of the December FOMC minutes to gauge how the Fed really stands towards the $10-billion stimulus reduction it decided to implement.

The anticipation alone of the release and speculation as to the content of the minutes has sent the U.S. dollar climbing near a five-year five against the Japanese yen. Economists and traders expect that the stimulus reduction will continue a steady course over the next year with gradual decreases after each new FOMC meeting. According to San Fransisco Fed President John Williams, who is not currently a voting member of the committee, they bond-purchasing programme may well end this year.

A forecast by Bloomberg News survey, sees the Fed cutting the stimulus package by $10 billion dollars after each one of the next seven FOMC meetings, thus ending the programme by December 2014.

Fed Decision to Cut Stimulus Boosts European Stocks

The Federal Reserve’s decision earlier this month to begin tapering its economic stimulus boosted European shares for a second day, sending them well on their way from their biggest weekly advance since April. U.S. stock-index futures and Asian shares show little movement.

Goldman Sachs Group Inc. advised buying shares of Telenet Group Holding NV sending the stock on 2.5 percent jump. BAE Sysptems Plc lost 3.6 percent following the announcement that the United Arab Emirates ended talks to purchase its combat planes.

“European equities are set to edge higher on the open,” wrote Jonathan Sudaria, a trader at Capital Spreads in London, in an e-mail. “The post FOMC rally still has some momentum but only a muted move higher is expected today.”

After the Fed announced on Wednesday that it would decrease the amount of its economic stimulus by $20 billion, the Stoxx 600 gained 1.7 percent yesterday, recording its greatest two-day gain since June.

Gold Pares Weekly Loss But Set For Annual Drop

The Federal Reserve’s decision earlier this week to start cutting back on stimulus helped gold gain some of the ground it lost after closing at its lowest level since 2010. Accoridng to Goldman Sachs Group Inc., however, bullion’s downwards movement has not come to an end as the precious metal is set for its biggest annual decline since 1981.

The turbulent economic conditions around the globe that marked 2013 have diminished investors faith in gold as a store of value, sending it towards its first annual decline since 2000. On 18th December, the Fed decided to finally begin reducing its bond-buying programme from $85 billion to $75 billion. The decision pushed U.S. equities to record highs, while exchange-traded products that are backed by gold lost about $73 billion this year and mining companies dropped at least $26 billion.

Goldman’s head of commodities research in New York, Jeffrey Currie, said that “gold is now likely to grind lower throughout 2014. Much of the expected price decline has been priced in as opposed to a more gentle process as the Fed backs away from QE. When the gold market sees these events, it usually tries to price it in immediately.”

Markets Shift in Anticipation of Fed Decision

Another Fed decision, another craze on the market. It seems to be becoming a trend this month that every time the Fed meets or one of the policy makers speaks the markets go hay-wire as investors and speculators wage bets on the future of U.S. economy. The FOMC has been in meeting since yesterday and will announce its decisions later today, but the anticipation of the announcement has already sent the markets spinning out of normal trajectory.

Both European and U.S. stock futures gained along with Asian equities, while the currencies of emerging markets devalued and copper dropped before the Federal Reserve announces a possible taping of stimulus to begin this week. Indian shares, however, increased after the country’s central bank came to the unexpected decision not to raise interest rates.

The main issue on the table at the current FOMC meeting is the programme for reducing the $85 billion monthly bong-buying programme. At the end of their last meeting policy makers said they would like to see “more signs of a strength” in the U.S. economy before tapering, and the data for last month has certainly leaned that way. Whether will consider them enough for tapering however, still remains to be seen.

Mexican Peso Drops Most On Fed Tapering Speculatiosns

Speculations that the Federal Reserve will put a tapering programme for its stimulus in place at the end of its meeting tomorrow have caused drops on various currencies, but the most steep one among the world’s major currencies was seen in the Mexican peso.

The peso lost 0.4 percent against the U.S. dollar, while profits on fixed-rate peso bonds that will mature in 2042 gained 4 points or 0.04 percent. The 0.4 percent increase the peso had last week after the Mexican congress passed a bill ending the state oil monopoly has only short-lived.

A survey conducted by Bloomberg, showed that 34 percent of economists expect the Fed to begin curbing its monthly $85-billion bond-purchasing programme at its meeting on 17th-18th December, compared to only 17 percent in a poll held on 8th November.

Yesterday data showed that industrial production in the U.S. expanded 1.1 percent in November, compared to a revised 0.1 percent in the previous month that had originally been reported as a decrease, according to a report from the Fed today. Economists surveyed earlier had expected a 0.6 percent increase. The index of industrial production overall rose to 101.3, for the first time surpassing the levels it held in 2007 before the recession hit.

Gold Breaks Its Fall Despite Forecasts of Stimulus Tapering

Speculation that the Federal Reserve may decrease its economic stimulus as early as next week didn’t seem to be doing gold any favours; however, the safe-heaven’s decline halted after just two days as the five-month low prices may be luring investors back towards it.

Bullion to be delivered immediately increased as much as 0.4 percent in Singapore today, while yesterday prices had fallen 2.1 percent, the most since 2nd December. When data last week came in positive for U.S. payrolls in November, gold touched $1,210.61 on 6th December, the lowest since 5th July.

The precious metal is set for its first annual lost in 13 years with a decline of 27 percent this year as investors anticipate Fed cuts on improving U.S. economy. The FOMC meeting is scheduled for next week, 17-18 December, and 34 percent of the economist that participated in a Bloomberg survey expect the cuts to begin next month. On a poll conducted on the 8th November, only 17 percent thought so.

Gold for February delivery increased 0.3 percent after its greatest fall in 10 weeks yesterday. The volume of trading remained at similar levels to the 100-day average

Payroll Data To Trim the Dollar Further?

U.S. Payrolls data come out later today and everyone’s wondering whether the Federal Reserve will move into tapering even as early as this month. But the speculation is hurting the dollar which is set to drop for a fourth week in a row.

With the European Central Bank deciding not to move on an easing policy, however, the euro has advanced against all its major peers. In Japan, the head of an advisory panel commended on the necessity of immediate cutbacks from bond holdings by the Government Pension Investment, which caused the yen to trim off its weekly gain on the dollar for the first time.

The U.S. economy is expected to have added 180,000 new jobs last month, and if the ADP NFP data hold, the number might turn out even higher. Should the data however come in significantly lower, investors are expecting a huge sell off on the dollar.

The next meeting of the Federal Open Market Committee is scheduled for 17th-18th of December. Scrutinising the minutes of their previous meeting, which were published on 20th November, investors noted that policy makers would await further positive data to “warrant trimming the pace of purchases in coming months.”

Japanese Index Drops As Investors Try to Gauge the Fed’s Next Move

The yen rose against the dollar yesterday as investors continued their hunt for clues on when policy makers may taper the economic stimulus sending Japan’s Topix index spiralling down to its biggest two-day drop in nearly four months.

The carmaker Nissan Motor Co., which gets over a third of its revenue from North America, fell 3.5 percent. A gauge that tracks warehousing and harbour transportation shares experienced a losses among the 33 Topix industry groups, leading Yusen Logistics Co. into a 4.8 percent loss. The package deliverer Yamato Holdings Co. experienced the greatest decline on the Nikkei 225 Stock Average.

The Topic lost 0.9 percent, closing its two-day fall to 2.6 percent, the most since 8th August, while the Nikkei 225 dropped 1.5 percent. The Japanese currency, however, rose 0.3 percent, gaining for a third consecutive day. Investors are now eagerly looking forward to the release of the official NFP report tomorrow as the ADP NFP yesterday showed the most new job on the American market in a year. Other reports, such as the ISM Non-Manufacturing PMI, however, came in at lower levels than forecast.

Although Japanese shares are seen dropping just as fast as they rose, investors are not moving in on the pockets created by the market appearing unwilling to risk that the Fed may actually start tapering soon. The Topix (TPX) had reached a six-month high just on 3rd December before it started dropping again. The measure climbed 43 percent this year, recording the greatest advance among the major developed markets. Today, the index traded at 1.24 times its book value, in comparison with 2.59 for the Standard and Poor’s 500 Index and 1.76 for the Stoxx Europe 600 Index yesterday.

Silver and Gold Lose Trading Steam

Precious metals have been pushed down in the markets again on the prospect that the Federal Reserve will reduce economic stimulus as more reports indicate growth in the U.S. economy, with both gold and silver hitting their lowest points since the summer.

The Bloomberg U.S. Dollar Index, which measure the currency’s strength against 10 of its major peers, remained near its 11-week high since yesterday, with U.S. manufacturing picking up most speed in two years. The NFP report is expected to show an increase of 181,000 for last month.

The stronger U.S. economy has lessened investors’ faith in the store value of the precious metal which might see its first annual drop in 13 years. The minutes form the last Fed meeting were released on 20th November revealing that policy makers expected an improvement in the economy “in coming months” which has investors anticipating an early tapering of the stimulus. The next meeting will take place on 17th-18th December.

Gold for immediate delivery dropped 0.7 percent. Prices reached $1,212.47, the lowest since July 5. Bullion for delivery in February dropped 0.5 percent on the Comex in New York.

FOMC Meetings Rekindle Hopes of QE Tapering “in Coming Months”

The highly-anticipated minutes of the Federal Open Market Committee’s meeting of 29-30 October were released yesterday at 7 p.m. GMT in Washington impact the U.S. dollar positively in the foreign currency exchange markets as the report appears to confirm inspector speculation that the Fed will taper its $85 billion economic stimulus “in coming months.”

Home and Retail Sales data for October released earlier in the day showed improvement in the U.S. economy for October and the minutes state that the members of the FOMC “generally expected that the data would prove consistent with the committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months.”

Despite the ambiguity of the minutes’ key term “in the coming months,” stock and bonds fell at increased speculation that the Fed’s asset purchasing may slow soon than expected. The Standard & Poor’s 500 Index slid 0.4 percent to 1,781.37, as the profit on 10-year Treasury increased by 0.09 percent to 2.8 percent.

Economists reading the minute have interpreted the extensive discussion of the committee’s members on future guidance as another sing that the Quantitative Easing is drawing closer.

A great part of the minutes also focuses on ways to better clarify their plans for keeping interest rates near zero, but no definitive decision has been recorded.

You Might Also Like...

You Might Also Like...

You Might Also Like...

You Might Also Like...

You Might Also Like...

You Might Also Like...

You Might Also Like...

You Might Also Like...

You Might Also Like...

You Might Also Like...