Posts Tagged "federal reserve"

Happy Landings as quantitative easing slows

Posted by on Jul 4, 2013 in Commentary, Featured, Market News

Happy Landings as quantitative easing slows

A couple of weeks ago, helicopter Ben (a.k.a. Ben Bernanke) announced the Federal Reserve was going to slow down the rate at which it was printing money. The printing presses, known as quantitative easing were always going to stop at some point. The fact that so much notice was given shouldn’t have come as a surprise. But it jolted the market. In my view, we should look at the background to the announcement, which is a return to economic growth and a fall in unemployment. Over the past few months, the stimulus of billions of dollars being printed aligned with low interest rates has ignited the US economy. There are still elements of risk in the world (we only have to look across the channel to the Eurozone to see risk). A slow down in the stimulus, rather than cessation should lead to continued economic growth in the US and help create a stable world economy. What does this mean to the trading community? Any economy that is showing good growth, falling unemployment, low inflation should have a strengthening currency. Whilst much of the growth has been in place for some months, the printing of dollars has held back the value of the dollar. It should follow that the dollar will appreciate against other currencies over the next few months. But watch out for wobbles on the way. Non-farm payroll figures tomorrow will be eagerly anticipated, as they will be the first figures released since the Fed announcement. Expect market volatility. Look for signs of continued growth, as this is likely to lead to further appreciation of the dollar, specially as weakness in the Eurozone...

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Central bank power

Posted by on Jun 20, 2012 in Commentary, Featured, News

Central bank power

When it comes to trading currencies in the forex markets, there is no-one to fear more than a central bank and comments made by them. Right now, the Federal Reserve (FED) are in committee, determining whether to intervene in the US economy. If they do, they will decide how and when to do it. In a market where trillions of dollars are traded daily, few institutions can affect the value of a currency as much as a central bank. An example earlier today is sterling (GBPUSD) as the minutes from the Bank of England meeting were released. The minutes had more impact on the currency than the actual decision. GBPUSD hourly chart showing 80 pip move between 09:00 and 10:00 The minutes were released at 09:30 and the currency moved more than 80 pips, down at first and then back again. By 10:00 it was pretty much where it was an hour earlier. This kind of volatility is one of the reasons I am cautious when there is a major news announcement. Little impacts the market as much as central bank news. Later today, the FED meeting concludes in the USA. Once details of that meeting are released to the market, there could be further volatility and currency re-alignment. We’ll know if there will be further stimulus in the US economy. Currencies are likely to trade sideways today until the announcement. The nature of the Greek government and the rolling Euro crisis is on the sidelines, for today at least....

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