Tag Archives: federal reserve

Euro on a Seven-Day Advance Before Draghi’s Speech Today

The euro has returned to old glories, albeit perhaps momentarily, as it sustains a week-long rally against the dollar matching its best performance since April 2011 before the speech of European Central Bank President Mario Draghi speaks in the European Union parliament today.

Data scheduled for today are expected to show an upturn in the industrial production of the euro-area and positive sentiment kept the currency trading near a six-week high. U.S. data, however, are also expected to show growth and the greenback ended a two-day decline against the yes as investors consider the possible impact of next week’s Federal Reserve meeting.

The euro remained fairly stable at $1.3784 yesterday and touched $1.3877, its strongest level since 29th October. The seven-day advanced matched its longest streak since an eight-day gain in April 2011.

The ECB refrained form changing interest-rates targets this month and President Draghi, who speaks at the European Parliament today, noted two days ago that it’s “crucial” for “other actors” to support the central bank’s monetary policy actions by effecting appropriate changes at the regional and national level for a sustainable recovery.

“The ECB, like all central banks, should not try to do what they cannot do and one of these is to supplement governments for structural reform action or repair broken banking systems,” he said in Rome.

U.S. Stocks Fall as Stimulus Cuts Draw Nearer

The next Federal Reserve meeting is taking place next week fuelling speculations that stimulus cut begin as early as next next which caused the second consecutive drop in the Standard & Poor’s 500 Index.

Cisco Systems Inc. dropped 1.6 percent while Laboratory Corp. of America Holdings plummeted 11 percent following a profit forecast that did not match analysts’ expectations. MasterCard Inc. (MA) gained 3.5 percent following the announcement that its board of directors approved to increase dividend by 83 percent and to split stocks by 10 for 1.

Although hitting a record level on 8th December, the S&P 500 lost 1.1 percent yesterday prolonging a two-day slide to 1.5 percent, marking the biggest slide since 7th November. The Dow Jones Industrial Average dropped 129.6 points as the volume of daily exchange of stocks exceeded the three-month average by 6.5 percent.

The Quantitative Easing of the Federal Reserve helped the S&P 500 climb 167 percent higher than its bear-market low in 2009 and the benchmark gauge gained 25 percent this year and is competing with the advance of 2003 as the biggest annual increase since 1998.

Polls Show A Change in Indian Leadership Boosting Stocks and Currency

Poll results for the upcoming elections in India favour the country’s stocks and currency as investors see a change in government bringing them new opportunities.

The SENSEX, the Indian benchmark index, jumped to record levels and the rupee hit a four-month high when results showed the main opposition party winning the state polls. The S&P BSE Sensex gained 1.5 percent while the rupee sold for 60.8475 per dollar, the most since 12th August. At the same time, the seven-day losing run of ten-year bonds came to an end, and ICICI Bank Ltd. (ICICIB) rose 4.6 percent.

The ruling party’s ten-year run of the Congress might be coming to an end with the Bharatiya Janata Party winning victories in areas that hold a sixth of the Indian population of 1.2 billion people. Polls show that Narenda Modi would likely be installed as Prime Minister come May. Modi’s howm state of Gujarat, moreover, has already been enjoying exceptional economic growth of a 10 percent increase with companies from Ford Motors Co. to the Tata Group being lured in, not least by the fivefold increase of the state’s power-generating capacity since Modi became its chief minister in 2001.

The markets seem to be approving of the poll results and to be looking for the new government fo come in with a mandate which will bring more foreign investments and help the rupee appreciate.

The Sensex is expected to climb by as much as 6 percent by the end of the year. So far it has recorded a 9.8 percent advance, the most among the four largest emerging markets, with foreigners investing nearly $18 billion into the country’s $1.1 trillion stock market, spurred on by the higher earning that the growing export industry brought on, as well as the stimulus by the Federal Reserve.

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.”

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.

Yen Slides on Lower Commodity Demand

With global hesitation to reduce economic stimulus and gains in stocks, demands for assets has dampened sending the yen spinning down against the dollar.

Yesterday marked the first break through the 100-lever point for the yen after two months of relative strength and the currency is expected to record weekly declines against all its major peers amidst data of slowing growth and ahead of the Bank of Japan’s meeting next week. The dollar itself, however, is set to fall against the euro for the first time this month as Janet Yellen, the nominee chairman for the Federal Reserve, stated that more signs of economic strength were needed before tapering begins.

The yen slid 0.2 percent to 100.20 per dollar and touched 100.31, its lowest level since 11th September. The Japanese currency fell 1.2 percent against the dollar in the third consecutive week of losses, and 1.8 percent versus the euro, marking the greatest five-day slide since July.

Gold Travels East on Lower-Price Path

Overall international demand for gold dropped 21 percent in the third quarters as both investors and central banks show reluctance in buying the metal, according to the World Gold Council.

The council announced in a report today that demand around the globe plunged to 868.5 metric tons, compared to 1,101.4 ton last year. Investors purchased 118.7 tons from ETFs and similar products, while central bank purchases fell 17 percent.

April of this year saw the gold market move into a bear, casing gold prices to drop 24 percent with inflations doubting the precious metal’s value as equity prices rallied against falling inflation levels.

If we isolate the Easter market, however, a different image emerges as gold demand jumped in China, India, and the Middle East in the 12 months to September against decreasing European sales. The World Gold Council mentioned that the difference in markets highlights the movement of the global bullion market form west to east.

Demand for jewellery, bars and coins jumped 30 percent in China to 996.3 metric tons, while in India gold experienced a 24 percent increase reaching 977.6 tons. On the contrary, demand in Europe slid 11 percent during the same period with marked drops in the U.K., France, and Switzerland. Moreover, the share of Global sales corresponding to Asia and the Middle East rallied to 68 percent from previously 65 percent over the 12 months, while the share from the European market fell to 8.3 percent from 11 percent.

With gold set for an annual decline. the first since 2000, bullion travels eastward attracting Asian investors with its lower prices as the Federal Reserve considers curtailing its financial stimulus amidst signs of an economic recovery for the U.S.

Central Banks Easing The Way To The Bottom

The way out of the global financial crisis that set its talons into the global economy in 2008 has proven quite precipitous as nations race-not so as to be the first to climb out of it, as one might have expected, but to be the first to hit rock bottom, apparently.

The European Central Bank shocked the financial world last Thursday when it cut its refinancing rate to a record low of 0.25 percent amidst equally shocking low inflation rate, despite the euro’s climb to its highest level since 2011 in the preceding weeks. The rate cut that caused the euro to drop 1 percent against the US dollar in the very day is expected to restrain the euro at decidedly lower levels in the near future.

The ECB’s move, however, was not an isolated incident, but only one skirmish in the more general shock-therapy strategy central bankers across the globe seem to have adopted over the last year. On 11th September, the day of the ECB rate-cut announcement, Czech policy makers advised they would be weakening the koruna, intervening in the foreign exchange market for the first time in over a decade. New Zealand has also dropped hints about delaying rate increases in order to moderate the strength of its dollar, while Australia considered its currency to be lingering at “uncomfortably high” levels. And all this just in the current month.

Last month, the US put all major currencies through a roller-coaster ride as speculators tried to predict the future of the U.S. government’s quantitative easing programme and the limit of the country’s debt ceiling. Policy makers suspended governmental operations for over a fortnight with the Federal Reserve finally deciding not to begin curtailing its economic stimulus until further signs of growth in the economy.

Last spring, economists anticipated that the Bank of Japan would ease its cash flow, but none expected the $1.4 trillion monetary mega-stimulus that it scheduled for release over a span of less than two years.

Amidst this new era of “currency war,” as the competitive currency devaluation was termed by Brazil’s Finance Minister in 2010, and with inflation preventing further investments by its agonisingly slow pace, the International Monetary Fund has spoken about the prospect of downgrading the global economy to urge central bankers to refrain from weakening currencies as a means for boosting competitiveness.

Crude Prices Fall to 4-Month Low as Production Hits 24-Year High

Crude oil price is hovering dangerously over its four-month low price as futures rose 1 mere cent above the lowest close since June. With investors speculating that U.S. stockpiles have increased for a seven consecutive week, outlook does not appear to be improving for West Texas Intermediate, which has vacillated between gains and losses four the last four months.

With the U.S. economy, and the global one by consequence, on the rocks last month over the partial government shutdown and the Fed’s meeting tapering or extension of quantitative easing pumped into the nation’s economy, investors look forward to tomorrow’s release of supply data by the Energy Information Administration to assess demand levels in the world’s biggest consumer of oil.

Last week’s production reached a 24-year high while crude stockpiles expanded by 2.2 million barrels to 386.1 million. WTI for December delivery was at $94.50 a barrel in electronic trading on the New York Mercantile Exchange, down 12 cents, at 4:26 p.m. Singapore time. It closed at $94.61 on Nov. 1, the lowest since June 21. The volume of all futures traded was about 48 percent below the 100-day average.

Concerns that the U.S. government’s 16-day shutdown put a drag on economic growth and hampered oil demand has been keeping traders on their toes as they await the release of other key economic data later in the week that might shed more light on the Fed’s true stance towards its $85 million bond-buying programme after officials said they would proceed with the curtailing of the stimulus upon receiving more indicators of strengthened economy.

Third-quarter’s preliminary economic growth to be released on Thursday and the highly anticipated Non-Farm Payrolls report scheduled for Friday (delayed 7 days due to last month’s halt in government operations) will play an important role not only on investor sentiment, but also on the Fed’s decision regarding economic stimulus at its next meeting in December.

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...