Posts Tagged "ben bernanke"

Is inflation next?

Posted by on Sep 14, 2012 in Commentary, Market News, News

Is inflation next?

Yesterday evening, Ben Bernanke announced the action the Fed will be taking to provide a boost to the US economy. QE3, or printing dollars at the rate of $40 billion a month will continue until the US economy has better growth and employment. These are commendable goals but we have to ask: is inflation next? However, with more dollars being produced month on month, it means the value of each dollar decreases. As the value of the dollar decreases, the value of other currencies relative to the dollar increase, hence the rise in the value of the Euro over the past week, in spite of the Euro having it’s own issues still. The Euro remains the only other credible world currency to the dollar at this time. More worrying is inflation. The US Dollar is the world currency and all commodities are priced in US Dollars. In theory, assuming a commodity has a constant value, you will need more US Dollars to buy it. The price of a barrel of oil has been rising. Brent crude has risen from a low of $90 back in April to $117 as I write this piece. It has risen $2 since the announcement of QE3. The impact on the price of gold has been even more pronounced. After the US employment figures last week, when non farm payroll numbers were weaker than expected, gold rose by $35 an ounce, or 2% in anticipation of QE3. When QE3 was announced yesterday evening, the price of gold rose again. It is now $75 an ounce more expensive than it was at this time last week, a rise of more than 4%. Suppose these price rises in commodities are representative of things to come. Oil, coal, gas, agricultural products, such as corn, rice, animal feeds, metals like iron ore, platinum and so forth are all going to rise in price, unless there is a corresponding exchange rate fall. As these base commodities rise in price, surely the ripple effect will end up as further inflation for the rest of the world....

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August trading review

Posted by on Aug 31, 2012 in Commentary, Featured, Market News, News

August trading review

It’s been a quiet month, with trading volumes very low. Volumes of UK equities traded daily are about half the levels from earlier in the year. Yet the FTSE index has managed to reach it’s highest levels since early April. The current trend is showing upwards, with the moving averages all in the right direction and the 50EMA providing support yesterday. After a fantastic Olympics and now the amazing paralympics, eyes are not focused on trading just yet. When you look at the narrow trading range of EURUSD this week, and for much of August, you could be forgiven for thinking the market has gone into cardiac arrest. I can conjure up a picture of this now, the market lying moribund on the ground, not a movement. And rushing over with the defibrillator, Ben Bernanke and Mario Draghi. One of them is holding the left paddle, the other the right. Neither is too sure what to do next, but both are looking down at the patient. The patient is wearing a sweater with the words “world economy”. Now what? Both of them are preparing their next moves. For the defibrillator to work effectively, they’ll need to both act in unison. Problem is, they are facing different battles in their own respective continents, with a USA election imminent, a Greek progress report in a few days coupled with a constitutional court decision in Germany. All will be interspersed with a US holiday early next week, followed by non-farm payroll figures next Friday. Will the defibrillator be used? Or will the patient remain lifeless? There’ll be an interesting couple of weeks ahead. Happy...

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