No Taper by the Fed, interest rates could stay near 0% till 2015

The FOMC decided at its meeting no throttling of bond purchases. According to a majority of FOMC members interest rates by the Fed could remain until the year 2015 at the current level close to 0%.

Economic Growth uncertain

Fed Chairman Ben S. Bernanke said in his statement to the decision of the FOMC, the signs of a permanently stable growth in the eyes of the FOMC are not clearly enough. He noted that the program for the purchase of bonds was an essential support to stabilize the U.S. economy and job creation in recent months. A reduction of the current scale can therefore only come into question if the economy shows a secured growth.

Rate increase only at a unemployment rate under 6.5%

In their statement about raising rates, the Fed has negated its previous stance a little. Has been spoken of, that interest rates will be raised only if the unemployment rate fell to 6.5%, this should now only happen if this mark is broken. This looks at first glance only a minimal change in the representation, upon closer examination, however, striking that the Fed has opened a door with this statement, not to rise interest rates at a certain rate.

USD with sharp losses

Immediately after the publication of the USD has fallen sharply in all pairs. The pair EUR/USD shows a current increase of 1.13% at 1.3508 and the GBP/USD rising 1.22% to 1.6098 to date. Against JPY the U.S. Dollar shows a current loss of 0.99% at 98.13.

Risk Warning / Disclaimer
The opinions of the author to market behavior do not constitute a solicitation to buy or sell any financial products, but are merely a personal opinion. When you go into the trade in leveraged financial products, you must be aware that a loss up to the amount of your deposit and in addition, can also be an obligation to arise. Make yourself familiar with the active trade or get independent advice before you invest your own money and use only invest money that you can get over the worst case.

Market keep carefull optimism before thre Fed-Two-Day-Meeting

On Monday, September 16, the American market finished trading session with an increase. Inflow of optimism was explained, generally, by news that Lawrence Summers, being the obvious favorite of the president, withdrew the candidacy on the post of the head of FED. Summers has been considered as the supporter of toughening of monetary policy and therefore this news caused increase in demand for risk and sag of dollar in relation to the main currencies. Now chances that Janet Yellen will be chosen as the new chairman, became even more. And understanding that less aggressive candidate will come instead of Ben Bernanke, caused sharp reaction of the market.

Purchases were also supported by achievement of the agreement between Russia and the USA concerning elimination of the Syrian chemical weapon. As a result, the trading session has finished with an increase of 0,77%% for the Dow Jones reaching level of 15494.78, S&P 500 grew up for 0,57%% to level of 1697,60 points, and the index of the hi-tech companies Nasdaq has fallen for 0,12%% to a price of  3717,85.

The information that Syrian question has been solved also had an influence on commodity market, where Brent decreased to a level of 109,58$ per barrel and Light reached price of 105,40$ per barrel.

The majority of the main currency pairs opened week with a gaps, and during the day didn't close them. As a result, EUR/USD finished trading day around 1,3340, and GBP/USD – closed day at 1,5910. This morning, we can see EUR/USD traded on a level of 1.3344. Today will be released data on ZEW Economic Sentiment in Germany, which once again can confirm weakness of economic recovery in the region. Indicator growth to 45,3 from the 42 month before is predicted, however the last reports are giving the grounds to expect lower levels. If this occurs be true, pair can try to go throw the next support level on 1,3320 and go to the level 1,3280.

This week meeting of FED of the USA starting today still is a key event. Results will be declared tomorrow. Now remains less and less doubts that volumes of the program of quantitative easing will be reduced. As the most probable amount of reduction the sums of $10-15 billion are predicted. Tomorrow's decision of FED will designate further directions of the markets.

Risk Warning / Disclaimer
The opinions of the author to market behavior do not constitute a solicitation to buy or sell any financial products, but are merely a personal opinion. When you go into the trade in leveraged financial products, you must be aware that a loss up to the amount of your deposit and in addition, can also be an obligation to arise. Make yourself familiar with the active trade or get independent advice before you invest your own money and use only invest money that you can get over the worst case.

Larry Summers withdrew from possible candidacy as Fed Chairman, USD reacts with losses

Proposed by President Obama for the office of Fed Chairman, the former Treasury Secretary Larry Summers has now surprisingly declared that he will renounce his candidacy. As the name of Summers was mentioned as a possible successor of Ben S. Bernanke, he was quickly a favorite for the post among investors. Summers is regarded as less open to a loose monetary policy, as the second potential candidate, Janet Yellen. The prospect, the next Fed Chairman could not stand for a tightening of monetary policy, the dollar was starting the trading week in almost all pairs with losses.

The pair EUR/USD rises currently 0.47% at 1.3359 and the GBP/USD shows a current increase of 0.39% at 1.5936. Against the JPY and the USD losing 0.30% at a current price of 99.05. The strongest loss the USD currently registered against the AUD. The pair AUD/USD rises to 0.87% currently at 0.9326.

Risk Warning / Disclaimer
The opinions of the author to market behavior do not constitute a solicitation to buy or sell any financial products, but are merely a personal opinion. When you go into the trade in leveraged financial products, you must be aware that a loss up to the amount of your deposit and in addition, can also be an obligation to arise. Make yourself familiar with the active trade or get independent advice before you invest your own money and use only invest money that you can get over the worst case.

Investors waiting on the FOMC-Meeting this week, but what will they do?

After the beginning of July, when the speculation began, the Fed could reduce its program to purchase bonds in September, partly negative data from the U.S. economy in recent weeks, analysts and investors are worried about, that the Fed is already prepared to take this step.The final decision can not be predicted with certainty, but we venture a prediction.

Economic growth since early year

When the Fed started the program earlier this year, it was stated that this remains active until the economy shows steady growth, and the Jobless Claims fell to 7.0%. The interest rates could be increased if 6.5% is reached and an inflation rate of 2% or more is seen in the long term.
If we now look back at the past eight months, there is basically a positive trend over the period observed. The unemploymnet rate in January was at 7.8% and has dropped to 7.3% currently. While this is only half the way down to the desired 7.0%, but the labor market is on the right track.
The economic growth in the United States had come at the end of 2012 to a virtual standstill. Although currently we can not speak of a booming economy, but the last beige book shows moderate growth and there are no visible signs that this trend threatens to tip over.

The further development indicates tapering

If we now take a look the data on forecast of further development, an upcoming tapering is indeed quite likely, but it could also be that the Fed waits for the further development until December so as not to prematurely send a wrong impulse in the economy. But exactly this further development is it, which makes a further delay appears to be little sense. Due to the demographic development, the total employment will be reduced, and thus the unemployment rate, even at a weak to moderate growth, faster than expected decline and can reach the targeted 7.0% in the first quarter of 2014.
Here, now would be the point reached at which the Fed program, in their own words, completely finish. But this would have the same effect as if you remove a sick patient on the road to recovery all medications in the mere hope he will be without this healthy. Alone the shock of removal medications his will worsen the patient's condition. The only safe way is a gradual weaning.

The first step will be a small

The Fed is aware of the consequences, of a too long putting off the tapering, fully aware. If they do not want to be shok the market by an abrupt termination of purchasing, they have to start early with reducing. If they wait until the requirements for a complete stop are reached, and then, in order to dampen the negative consequences, do not follow their own statements, the confidence in the Fed would suffer severely.

Overall, a first step to stop the program is the logical consequence of the past and expected development. Only the length of this step will be shorter than it was originally assumed. The sum of the purchases will probably be reduced by 10 billion dollars a month. This will put a signal that the markets can not hope for a lasting almost unlimited support from the Fed, and the possible negative effects will be limited.

Risk Warning / Disclaimer
The opinions of the author to market behavior do not constitute a solicitation to buy or sell any financial products, but are merely a personal opinion. When you go into the trade in leveraged financial products, you must be aware that a loss up to the amount of your deposit and in addition, can also be an obligation to arise. Make yourself familiar with the active trade or get independent advice before you invest your own money and use only invest money that you can get over the worst case.