Stalemate
We reach yet another stalemate as the dominance of the central banks in the currency markets continues after the latest FOMC meeting. The continued manipulation of interest rates through quantitative easing continues. A growing economy being primed by $85bn of money every month, or $1 trillion annually. The FED has on numerous occasions hinted at tapering, but keeps shying away from taking the plunge. It could signal a readiness to reduce the stimulus and avoid the continual back tracking by reducing the stimulus to $80bn a month. In the overall scheme of things, I hardly think a $5bn...
Read MoreHappy 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...
Read MoreIs 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...
Read MoreQE3 arrives
This has been quite a momentous week on the currency markets. On Wednesday, the German constitutional court okay-ed the German governments contribution to the European Stability Mechanism (ESM), removing one potential obstacle in the Forex markets. It means the Eurozone countries have a backstop, for now. The Euro is trading close to 1.3100 against the US Dollar as I write this piece. A couple of months ago, the Euro was trading at 1.2250 and heading south. I would not have predicted a rise of this nature. So what has caused it? It is certainly not the strong Eurozone economy, that’s...
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