The Fed may strengthen commitment to record monetary stimulus as soon as today after faltering economic recovery and US credit rating cut saw big declines in equity markets. Investors believe that the Fed may say that the interest rate, balance sheet or both will remain stimulative for a longer period. The Fed holds its interest rate decision meeting today and could discuss introducing a QE3 after previous two rounds of bond buying totaling $2.3 Trillion which failed to spur sufficient economic growth and reduce unemployment below 9%. The central bank may say today the economic slowdown is persisting longer than expected and policy makers may also say the Fed’s securities portfolio will remain at a record for an “extended period” and replace shorter-term securities with longer maturities to reduce rates on longer-term debt.
The Yen and Swiss Franc rose against most currencies as concerns about US economic slowdown and EU debt crisis increased demand for the currencies as a refuge. Dollar declined on speculation that the Fed will reiterate its pledge to keep record monetary stimulus after equity markets slumped. EURUSD traded at 1.4283 highs, USDJPY traded at 77.06 lows, USDCHF traded at 0.7487 lows, AUDUSD traded at 0.9928 lows, GBPUSD traded at 1.6268 lows, Gold climbed to another record high of $1772.25 as investors flocked to the metal as a safe currency and Crude oil headed for the biggest two day loss in two years to lows of $75.71 on fears of fuel demand slowing down.
After the US credit rating was cut by S&P, the rating agency cut Fannie Mae and Freddie Mac ratings from AAA to AA+ citing the downgrade of the government’s AAA rating cut as a cause as they have a direct reliance on the US government. In other news, Chinese inflation accelerated to fastest pace in three years, by 6.5% YoY, limiting the scope for monetary easing to support growth as plunging stock markets signal the global recovery is weakening. German exports declined 1.2% after an increase of 4.4% in May adding to signs the EU economy is losing momentum as global economy falters.
Regards
M.Zohaib Gadit
Forex Trading Consultant, Shivani Financial
Address: Suite # 403, Portway Trade Centre, Main Sharah-e-Faisal
Opp. CDC Building, Near Nursery) Karachi,Pakistan.
Phone#: +9221-34328898-99
Cell: +92345-2259224
Web Site: www.shivanifinancial.com
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