BIGCAPITAL's Blog

March 10, 2011

3 Months From Now, US Fed Will Stop Buying

Filed under: Uncategorized — bigcapital @ 5:43 pm
Tags: , , , , , , , , , , , , , , , , ,

3 Months from now, US Fed Will Stop Buying.

Thursday, March 10, 2011 — http://marketpin.blogspot.com

== US Fed bond buys to finish, greenback and global stocks on radar ==

Fed’s Fisher warns could vote to stop bond buying

WASHINGTON (Reuters) – A senior U.S. Federal Reserve official warned on Monday that he would vote to scale back or stop the central bank’s $600 billion bond-buying program if it proves to be “demonstrably counterproductive.”

Dallas Federal Reserve Bank President Richard Fisher, who has repeatedly said he would not support any more bond buying after the program ends in June, said he was doubtful the purchases were doing much good.

“I remain doubtful enough as to its efficacy that if at any time between now and June, it should prove demonstrably counterproductive, I will vote to curtail or perhaps discontinue it,” Fisher said in remarks prepared for delivery to an Institute of International Bankers’ conference in Washington.

“The liquidity tanks are full, if not brimming over. The Fed has done its job,” he said.

The Fed launched its bond buying program in November to help an economic recovery that was struggling with high unemployment after the worst recession since the 1930s.

But since then, the economy has shown signs of strengthening with the jobless rate falling to a nearly two-year low of 8.9 percent in February.

Fed officials are due to meet March 15 to discuss the bond purchase program. In January, Fisher voted with the rest of the central bank’s policy-setting Federal Open Market Committee to continue it.

In comments to the bankers’ conference, Fisher said he did not feel that further monetary accommodation would help put more Americans back to work.

“It might well retard job creation, should it give rise to inflationary expectations,” he said, adding that perhaps the Fed’s policy has compromised the central bank by implying it is “a pliant accomplice to Congress’ and the executive branch’s fiscal misfeasance.”

== How About U.S dollar ? ==

Stretching out Treasury purchases past the end of June while reducing the monthly amount would help bond dealers adjust to the Fed’s withdrawal from the market, said Lou Crandall, chief US economist at Wrightson ICAP in Jersey City, N.J

NEW YORK – The Federal Reserve’s $US600 billion bond purchase program will be completed as planned, top Fed officials signalled, though they saw heightened economic uncertainty from unrest in the Middle East.

US central bank officials from Atlanta, Chicago and Dallas said they were keeping an eye on the risk higher oil prices could feed through into broader inflation, as well as their potential to hurt growth.

Atlanta Fed President Dennis Lockhart said he would not rule out more bond buys if the recovery dwindles. Dallas Fed President Richard Fisher said he would vote to end the program early if higher oil prices fed into broader inflation.

The program, announced in November to bolster a fragile economic recovery, is due to end in June. Since it began there have been signs the recovery is picking up steam.

Mr Lockhart, a policy centrist, said he was more concerned about the risk to growth from the oil price rise. He said he would be “very cautious” about increasing the size of the purchase program.

“Given the emergence of new risks, however, I prefer a posture of flexibility,” Mr Lockhart said.

He expected overall price pressures to remain subdued and warned it is too early to “declare a jobs recovery as firmly established”.

Mr Fisher, an inflation hawk, said he “fully expected” the $US600 billion program to “run its course.”

Mr Fisher told an international bankers’ conference he would vote to curtail or stop the program, however, if it proves to be “demonstrably counterproductive.”

The Fed meets on March 15 for its policy-setting meeting, at which it is expected to reaffirm its purchase plan. Fisher is a voter on monetary policy this year, Mr Lockhart is not.

In a CNBC interview, Chicago Fed Bank President Charles Evans said the Fed was closely watching rising oil prices, adding that they were “obviously” a headwind for growth.

Revolutions beginning in Tunisia and Egypt have spread to other countries in the region, including Libya and Bahrain. This has pushed the price of oil above $US100 a barrel, complicating the Fed’s objective of stimulating economic growth while keeping prices under control.

That said, Mr Evans pointed to the improving job market and said he expected economic growth of four per cent this year and next. He called the size of the purchase program “good”.

“I continue to think the hurdle is pretty high for altering our currently announced” program, Mr Evans, seen as a monetary policy dove and one of the most outspoken proponents for quantitative easing, said. Mr Evans does not have a vote on monetary policy this year.

Mr Fisher said the question will be whether the oil price rise is sustained.

“It is really a question of how that works its way through,” he said. “We have already seen very high gasoline prices. That’s one of the ways that it most affects the consumer.”

http://marketpin.blogspot.com

Advertisements

February 23, 2011

Dollar May Appreciate to 1.0067 Swiss Francs

Dollar May Appreciate to 1.0067 Swiss Francs: Technical Analysis

The dollar may reverse last week’s decline and rally 6 percent to its December high against the Swiss franc, Commerzbank AG said, citing technical indicators.

“Longer-term, we target 1.0067” Swiss francs per dollar, Karen Jones, head of fixed-income, commodity and currency technical analysis at Commerzbank in London, wrote in a report today. The exchange rate reached that level on Dec. 1.

The dollar strengthened 0.3 percent to 94.78 Swiss centimes at 12:30 p.m. today in London. The greenback slumped almost 3 percent against the franc last week and sank to 94.25 earlier today, the weakest level since Feb. 3, Bloomberg data show.

“We would allow the slide to continue to 0.9425, from where we would favor recovery,” Jones wrote. That’s the 78.6 percent Fibonacci retracement of the rally seen in February, Jones wrote.

The dollar may test resistance at around 97.74 centimes, she said. Those levels represent the 61.8 percent Fibonacci retracement of the move down from December and the high from Jan. 11, according to data compiled by Bloomberg.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Resistance and support levels are areas on a chart where technical analysts anticipate orders to sell or buy, respectively, a currency and its related instruments

Fed’s Fisher Says More Stimulus Unnecessary

Fed’s Fisher Says More Stimulus Unnecessary

(RTTNews) – A top Federal Reserve official declared on Thursday that we would not back more monetary easing when the Fed’s $600 billion quantitative easing program winds to a close.

Richard Fisher, President of the Federal Reserve Bank of Dallas, was quoted as saying that he could not foresee any circumstances that would warrant more stimulus and suggested that the central bank should turn its attention to unwinding support.

Fisher’s comments contrast with those made by the Chicago Fed President Charles Evans, who backed the Fed’s extremely loose monetary policy and assured that it had the tools to tighten quickly if needed should inflation rise faster than expected

February 8, 2011

Sterling Jumps on Improved Sentiment

Filed under: Uncategorized — bigcapital @ 9:38 am
Tags: , , , , , , , ,

 

Sterling Jumps on Improved Sentiment

Tuesday, February 8, 2011
http://marketpin.blogspot.com/

The Pound has made gains today across the majority of the most actively traded currencies. Gains can be attributed to improved sentiment driving the market. For the last couple of weeks the pound has suffered from negative sentiment caused by very poor Q4 GDP figures for 2010. The reversal has however been driven by last week’s better than expected UK manufacturing and services sector news. Markets are also guessing that interest rates in the UK could rise sooner than previously expected with potentially three incremental rises in 2011.

The Pound has consolidated its gains in trade this afternoon as investors become coy ahead of the BoE rate announcement. Markets widely accept that it is unlikely that the Bank of England will make any adjustments to current monetary policy. If this is the case, traders focus will then shift to the minutes at the end of the month to help second guess when we might see the first interest rate hike of the year. Most analysts predict that the Bank of England will adopt a ‘wait and see’ approach and wait until May for the Q1 GDP figures for 2011.

Inflation in the UK remains a risk and is the reason for heightened interest rate expectations. Inflation is expected to continue to rise in the short term and could pose a significant threat to the UK economy if not dealt with properly by the Bank of England. The problem is however that any rise in interest rates could put the stoppers on the UK economic recovery and trigger another recession. The Bank of England therefore faces a very difficult task in balancing the risks to economic growth with inflationary pressures.

The Euro has suffered in the last week with the S&P downgrading Ireland’s credit rating. This has fuelled ongoing concerns of Sovereign Debt contagion throughout Europe. The GBP/EUR pair has jumped from a low of 1.1531 on the 26th January to 1.1920 in trade today. This 3.5% move is a significant recovery and could see a subsequent upward move with sufficient momentum through the psychological 1.20 level.

Factory orders in Germany weakened for the first time in three months today. Demand slipped 3.4% in December almost 2% worse than expected. A slowdown in Germany will drag on the Euro exchange rate as investors see this powerhouse as part of the Euro’s core strength.

The Dollar has seen mixed price action today, most traders expect the market to consolidate yet remain above the psychological 1.60 level. Similar to the expectation on GBP/EUR we would expect GBP/USD to rally if we see an indication that the Bank of England will normalise monetary policy with a series of interest rate hikes this year.

http://marketpin.blogspot.com/

January 8, 2011

Surprise jobs surge boosts U.S economic outlook 2011

Filed under: Uncategorized — bigcapital @ 2:17 am
Tags: , , , , , , , , , , ,

Surprise jobs surge boosts U.S economic outlook 2011

(Reuters) – A surprise surge in private-sector employment last month to its highest level on record provided the most bullish signal in months that the U.S. economy is on the mend.

Private employers added 297,000 jobs in December, triple the median estimate by economists and up from the gain of 92,000 in November, an ADP Employer Services report, whose data goes back to 2000, showed on Wednesday.

The report undercut the prices of the U.S. Treasury securities, and helped the U.S. dollar gain against the yen and the euro. U.S. stocks opened lower though they did pare losses after the jobs news.

“Sometimes numbers come as bolts from the blue; this is one of them,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

“Nothing in any other indicators of the state of the labor market last month — jobless claims, help wanted, surveys — suggested anything like this was remotely likely.”

ISM’s index on the services sector also came in better than analysts expected, though the index’s employment component was a touch weak. Read about ISM services index.

“The data today still leaves an impression that a U.S. upside growth surprise in 2011 needs fresh assessment,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank.

Macroeconomic Advisers Chairman Joel Prakken noted seasonal factors may have boosted the December numbers but said growth in employment was “comfortably into positive territory and seems to be accelerating.”

http://marketpin.blogspot.com/

January 1, 2011

IMF Economist Sees Two-Speed Recovery In 2011

IMF Economist Sees Two-Speed Recovery In 2011

(RTTNews) – A two-speed economic recovery will be extended into 2011 with rich nations facing weak growth and emerging markets moving ahead with strong recovery, according to IMF’s chief economist Olivier Blanchard.

In an interview to the Fund’s online magazine, IMF survey, Blanchard noted that along with their strong rebound, emerging economies will be facing tough challenges like managing possible overheating and capital flows. At the same time, growth in advanced economies will remain low, barely enough to bring down unemployment.

“The two-speed recovery, low in advanced countries, fast in emerging market countries, is striking and its features are increasingly stark. They will probably dominate 2011, and beyond,” Blanchard said.

He also warned that countries will be risking a healthy recovery in the absence of continued focus on rebalancing their economies in the coming year, including structural measures and exchange rate adjustments.

Countries with excessive budget deficit must rely more on external demand or exports. And, by symmetry, surplus countries, many of them emerging markets, must do the reverse, shift from external demand to domestic demand and reduce their dependence on exports, the economist noted.

Regarding the economic prospects of low-income countries, he said recovery in trade and high commodity prices have bettered economic conditions in these nations. Private domestic demand also remained quite strong

Source: http://marketpin.blogspot.com/

Blog at WordPress.com.