Tag Archives: FOMC Meeting

U.S: Markets Watch for Faster Interest Rate Increases

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

Main Trading Event Of The Day: U.S. FOMC Economic Projections @ 18.00 GMT

WHAT WE’RE WATCHING TODAY

U.S Fed Economic Projections: Markets Watch for Faster Interest Rate Increases

The largest increase in core consumer inflation in almost three years has added fuel to market speculation that it will move faster to raise interest rates. The consumer price index climbed 0.4 percent in May from a month earlier, higher than expected and the biggest increase since February 2013. The annual increase was 2.1 percent, following April’s 2 percent year over year gain. Core CPI was up 0.3 percent, the biggest increase since August 2011. It is widely expected the Fed will announce that it will continue paring back its bond-buying program by another $10 billion, while emphasising that it sees the economy improving, but not sufficiently enough. Even if the Fed gives inflation a nod, the CPI is not its choice metric. While CPI has climbed over the Fed’s target of 2 percent inflation, the Fed also watches the PCE, the personal consumption expenditures price index.

Fed officials are also expected to cut their forecast for GDP, after a negative reading on first quarter GDP and their views of the unemployment rate, which was forecast at 6.1 to 6.3 percent by the fourth quarter, as it is already at 6.3 percent. This has led to the speculation the Fed could also show that the views of some officials have changed on when it will raise the Fed funds rate for the first time. Currently, the market believes the first move will be later in 2015, but expectations could change to earlier in the year if individual officials change their forecasts, and that could create volatility. U.S. FOMC Economic Projections today @ 18.00 GMT.

Shares Set To Rise As All Eyes On The Fed

European stocks were seen nudging higher on Wednesday, reflecting gains on Wall Street, although the rise was seen limited as investors wait for the U.S. Federal Reserve to conclude its policy meeting. The Fed is expected to cut another $10 billion from its monthly bond purchases, while investors will be watching for any comments on when the Fed would begin to raise interest rates and its outlook for the economy. Data released on Tuesday showed a surprisingly high reading for U.S. inflation, which sparked speculation of a hawkish tilt to the Fed’s policy outlook. Market watchers expect Britain’s FTSE 100 to open 12 points higher, or up 0.2 percent and Germany’s DAX to open around 17 points higher, or up 0.2 percent.

Disappointing Trade Data Casts A Shadow Over Japan

Official data reveals that Japan’s exports and imports declined in May, fuelling concerns about the outlook for the world’s third biggest economy, as it weathers an increase in the country’s consumption tax. May exports fell 2.7 percent from a year earlier, the first annual decline in 15 months, much worse than analyst expectations. Imports fell 3.6 percent on-year, compared with expectations for a 1.7 percent rise, bringing the trade balance to a deficit of 909 billion yen ($8.9 billion) in May. It remains to be seen whether Abenomics, the term used by analysts and commenters use to describe the economic policies of Japan’s Prime Minister Shinzo Abe, can stimulate domestic spending sufficiently to offset weak export demand. Part of that policy has been huge monetary stimulus to help weaken the yen and end deflation. Although the yen weakened about 22 percent against the dollar in 2013, its impact on exports has faded while the currency has strengthened almost 3 percent this year. The breakdown of the trade data showed that exports to Asia and the U.S. fell in May.

Japan raised its consumption tax in April for the first time in 17 years, with the tax rising to 8 percent from 5 percent. While consumers stepped up their spending ahead of the tax hike a slowdown in consumption after that is now weighing on economic activity. Japan’s markets showed little immediate reaction to the trade data. The benchmark Nikkei stock index rose 0.3 percent in early trade while the yen was little changed around 102.2 per dollar.

That sums up today’s highlights! Don’t forget, you can stay in touch via Facebook, Twitter, Google+ and LinkedIn for all the latest market updates. We hope you have a profitable day on the markets.

Fed May Raise Rates Faster Than Expected

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

Main Trading Event Of The Day: USD Core CPI @ 12.30 GMT

WHAT WE’RE WATCHING TODAY

Fed Expected To Raise Rates Faster Than Expected

Economists expect the Federal Reserve to raise its benchmark interest rate faster than market expectations. Investors are assuming a slower pace of rate increases than the Fed itself, and may be overlooking recent reports showing the world’s largest economy is gaining strength after contracting in the first quarter. In March, officials predicted the fed funds rate, now between zero and 0.25 percent, would rise to 1 percent at the end of next year and 2.25 percent at the end of 2016. Fed officials may have underestimated the strength of the economy. Unemployment stood at 6.3 percent in May, at the top end of the range most officials forecast for the fourth quarter. Similarly, the personal consumption expenditures price index - the Fed’s preferred gauge of inflation, rose 1.6 percent for the 12 months ending April, a rate most officials expected at the end of the year. Officials will release a new set of quarterly forecasts for unemployment, inflation, economic growth and the benchmark federal funds rate at the conclusion of their meeting tomorrow.

The Tide Turns Against The Euro

The euro tumbled following monetary easing from the European Central Bank earlier this month and analysts anticipate further currency weakness. Market positioning data released on Friday showed that net short positions in the euro/dollar i.e. a bet on the euro falling, have risen to their highest level since late May 2013. Europe’s single currency has declined just over 3 percent from a 2 1/2 year high hit in early June, undermined by the ECB’s decision to impose a negative interest rate on banks for their deposits and cut its main lending rate in a bid to lift inflation and a weak economy. Currency analysts say the ECB’s monetary easing has fueled the use of the euro for carry trades - borrowing money in a currency that is backed by low interest rates to fund investments in higher-yielding assets. It seems, therefore, that the tide is turning against the once-resilient euro. Recent data shows that weekly market positioning data speculators have increased bullish bets on the greenback to their highest level in almost four months.

Iraq Violence Lifts Gold’s Safe-Haven Appeal

Gold steadied below a three-week high on today as escalating tensions in Iraq attracted some safe-haven bids. Bullion initially rallied after the United States said it could launch air strikes to support the Iraqi government after a rampage by Sunni Islamist insurgents. Investors often turn to gold or other precious metals as a safe haven in times of political or financial uncertainty but so far this year, gold has failed to maintain gains despite heightened geopolitical tensions. Gold’s initial gains were also boosted by developments in Ukraine. Traders warned this Wednesday’s Federal Reserve policy meeting could bring caution to any rally in gold as markets watch for any signals on when the U.S. central bank might begin raising interest rates.

That sums up today’s highlights! Don’t forget to keep a check on all the market events of the day via our Facebook, Twitter, Google+, and LinkedIn. We hope you have a profitable day on the markets.

No Surprises Expected At Today’s Fed Meeting

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

WHAT WE’RE WATCHING TODAY

No Surprises Expected At Fed Meeting; Incremental Taper Set To Continue

The Federal Reserve ends a two-day meeting today with its 18.00 GMT statement, where it is expected to announce that it will cut back its quantitative easing, bond buying program by a further $10 to $45 billion a month. The Fed is likely to discuss its statement, the economy and the conditions that might lead it to raise short term interest rates. The central bank’s policy statement could be a little more upbeat on the margin, as recent economic data has supported the central bank’s conclusion that economic growth was only temporarily held down in the first quarter by winter storms. In March, the Fed statement said that the economy slowed in March “in part” because of the storms.

The data the Fed will review during its meeting will also interest the markets. First quarter GDP will be released and economists expect a super sluggish 1.2 percent rate of growth in the first quarter. On the upside, ADP also releases its private sector payroll report and expects a 210,000 increase in April payrolls, close to what is expected in the government’s Friday jobs report. Fed officials believe the economy is on track to slowly improve in the second half of the year and could be strong enough for the central bank to begin to raise short-term interest rates in the second half of 2015.

Dollar Up Versus Euro Following Soft German Inflation

The U.S. dollar rose against the euro on Tuesday after a softer than expected reading on German inflation added to mounting concern about the euro zone’s low inflation, which could initiate further easing from the European Central Bank if it continues. The euro EUR/USD fell to $1.3809 from $1.3851 late Monday. A preliminary reading on German HICP inflation showed an increase of 1.1% in April, missing estimates of a 1.3% rise in inflation. The central bank targets inflation of just under 2% in the medium term as a guidepost for its monetary policy. The ECB has maintained that its inflation expectations remain anchored, while pointing out that continued low levels of inflation could pose a risk to those expectations. ECB officials have highlighted the high level of the euro exchange rate as a factor weighing on inflation and have mentioned quantitative easing as a valid policy option. Most analysts agree that the euro likely won’t substantially lower from its current level until a concrete action is taken by the central bank.

Twitter’s Lackluster Results Leave Investors Twitchy

Twitter reported lackluster user and usage growth for the second consecutive quarter yesterday, deepening investor concerns about its struggle to gain a mass following. Twitter’s stock fell more than 10 percent after hours to $38.05, below its post-initial public offering low of $38.80 on November 25. More worryingly, the company said its 255 million monthly users, on average, appeared to check the service less frequently than a year ago. The results revealed slowing momentum at a company that exuberant investors just six months ago had argued could one day match Facebook’s scale. At its peak in December, Twitter enjoyed a $46 billion market capitalization on just $665 million of revenue in 2013, making it one of the world’s priciest stocks. Cracks began to show in February, when Twitter disclosed that user growth had fallen to its lowest rate in years, prompting Chief Executive Dick Costolo to promise tweaks to Twitter’s design. Investors will be closely monitoring Twitter stock prices as these new developments are implemented amid the latest disappointing earnings report.

That sums up today’s highlights! Don’t forget you can find us on Facebook, Twitter, Google+ and LinkedIn where you can find all the latest news and updates on the markets. We hope you have a profitable day on the markets.

Will Today’s FOMC Minutes Move The Markets?

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

Main Trading Event Of The Day: USD FOMC Meeting Minutes @ 18.00 GMT

WHAT WE’RE WATCHING TODAY

Will Today’s FOMC Minutes Move The Markets?

The Fed is due to release minutes of its March 18-19 meeting today at which it reduced the monthly pace of bond buying by $10 billion to $55 billion. Whether they reveal anything new or just nuance, the minutes from the Fed’s last meeting will be a major highlight of the trading week. Traders are watching to see if the minutes take on a more hawkish tone, particularly after Fed Chair Janet Yellen said that the Fed could start raising short-term interest rates about six months after ending its bond-buying program, expected in the fall. The Fed dropped part of its statement that linked raising rates to an unemployment threshold of 6.5 percent. Unemployment was at 6.7 percent in March. FOMC minutes are known to move markets even when they really provide little new information.

The dollar was at $1.3708 per euro today after strengthening 0.3 percent last week to $1.3705. The yen added 0.2 percent to 103.08 per dollar, extending a 0.6 percent advance on April 4. It gained 0.2 percent to 141.30 per euro, following a 0.7 percent jump at the end of last week to 141.54. Stocks rose slightly Tuesday, with the Dow gaining 10 to 16,256 and the S&P 500 up 6 at 1,851. The Nasdaq rose 33 points or 0.8 percent, to 4,112.

FOMC Meeting Minutes @ 18.00 GMT

Dollar Down, Yen Up As BOJ Dampens Stimulus Hopes

The dollar hovered at three-week lows against major currencies today, having broken decisively lower as the yen squeezed higher and the euro gained a tailwind. The moves were sparked partly by yesterday’s comments from Bank of Japan Governor Haruhiko Kuroda who said there was no need for additional stimulus to escape years of debilitating deflation whilst adding that the world’s third-largest economy can ride out the impact of a sales tax rise. Recent remarks from European Central Bank officials have also suggested no urgency for any immediate policy action. The dollar fell more than 1 percent against the yen in its biggest one-day drop in over seven months to 101.55. It has since drifted back up to 101.91. The euro climbed as far as $1.3812, pulling further away from Friday’s trough of $1.3672. The dollar also slid on a raft of emerging market currencies where investors have been wagering massively on dollar strength that has not materialised, forcing a bailout of long positions. In contrast, the Japanese currency gained ground on the euro, the Australian dollar and many other currencies as well, as investors rushed to cover bearish positions.

China Commodity Demand Not Peaking

China’s economic deceleration has shaken commodity markets, however, according to the International Monetary Fund, its demand for commodities is a long way off peaking and does not mean that its rebalancing away from an investment-led economic model will lead to a decline in consumption of commodities. Observing growth trajectories in China, South Korea and Japan, the fund found that China’s per capita gross domestic product would need to double before that started to happen. Instead, the IMF points out that the composition of Chinese demand for commodities is likely to shift. As Beijing moves to shut down unprofitable steel factories, growth in demand for iron ore and copper should moderate. China is still importing iron ore at record levels but these imports are expected to grow at a slower pace from now on. Concerns over China demand partly explain why iron prices have fallen 12% since the start of 2014. By comparison, the fund said, Chinese demand for high-grade metals like aluminum is likely to prove more resilient in years ahead. The fund also anticipates other commodities will do well as incomes in China rise: high-protein foods and zinc. Losers could include rice, copper and eventually coal.

That sums up today’s highlights! We hope you have a profitable day on the markets.

U.S. Stocks Gain After Data While Asian Stocks Rebound

Here’s Friday’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the markets:

Main Trading Event Of The Day: CAD Retail Sales m/m @ 12.30 GMT

WHAT WE’RE WATCHING TODAY

U.S. Stocks Gain After Data While Asian Stocks Rebound From Biggest Decline In Seven Months

U.S. stocks rose for the third time this week as reports on leading indicators and regional manufacturing fuelled optimism in the economy, overshadowing concern, following Wednesday’s FOMC meeting, that interest rates may rise in the middle of next year. The Standard & Poor’s 500 Index gained 0.6 percent to 1,872.01 at 4 p.m. in New York. The Dow Jones Industrial Average added 108.88 points, or 0.7 percent, to 16,331.05. Both gauges erased most of yesterday’s declines. Asian stocks, meanwhile, rose with a regional index of shares outside Japan rebounding from the biggest loss yesterday since August. The MSCI Asia Pacific excluding Japan Index advanced 0.7 percent to 452.10, paring this week’s slide to 0.4 percent. The measure fell 1.7 percent yesterday, taking its loss this year to 4.1 percent as data from exports to industrial output showed signs of a slowdown in China and Federal Reserve Chair Janet Yellen indicated U.S. interest rates could rise as soon as six months after the end of the central bank’s bond-buying program. Analysts claim to be not overly cautious and that the focus will be directed back towards China on Monday.

European Markets Set For Lacklustre Open Following Banking Reform News

European markets are expected to have a subdued open after a busy week, as the market absorbs concerns about the Federal Reserve and banks. The FTSE was down 4 points to 6538, the Dax is seen steady at 9296 and the Cac up 1 point to 4328. On Thursday, the European Union finally agreed the terms to complete the region’s banking union. It was also a relatively quiet news day in the Ukraine crisis, with more sanctions announced, and a downgrade of Russia’s credit rating by Standard & Poor’s. In the U.K., data on public sector finances and UK banks external claims is expected at 9.30 GMT.

Time Is Of The Essence For Apple To Launch iWatch

Apple needs to launch an iWatch sooner rather than later, analysts say, or the company will risk losing its innovative edge to rivals. Apple also risks missing the huge opportunity that exists in the fast-growing wearable space if it doesn’t come out with something soon as there is no doubt that this sector is suddenly getting crowded. Pressure is coming from companies like FitBit and Jawbone who are making these devices and building an ecosystem around these wearables. There’s no shortage of speculation about what an iWatch will do, or when it will come out, but until Apple makes it official, the device is still completely hypothetical. Still, analysts who cover the company seem fairly certain that the company will debut a wearable product in 2014, particularly because wearables would be a natural fit for Apple’s ecosystem. The pressure is on for Apple and although it is not in the company’s style to rush things, they shouldn’t wait too long…

That sums up Friday’s highlights! Stay up-to-date with all the trading events and market news via our Facebook, Twitter, Google+ and LinkedIn pages! We hope you have a profitable day on the markets and wish you a great weekend!

Fed Outlook: Geopolitical Concerns, Rates Set To Rise

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the markets:

Main Trading Event Of The Day: Several today including USD FOMC Statement @ 18.00 GMT & GBP Annual Budget Release @ 12.30 GMT

WHAT WE’RE WATCHING TODAY

Fed Outlook: Geopolitical Concerns, Rates Could Rise At Turn Of The Year

Janet Yellen will chair the FOMC today with wide agreement on Wall Street over the outlook for policy this year and a forecast for stronger U.S. growth this year and next. There are some divisions over what happens to Federal Reserve policy in 2015 with a cloud of geopolitical concern hanging over the outlook but most analysts see the Fed tapering at the meeting today and at each of the remaining meetings this year. On average, analysts see the Fed tapering by around $10 billion at each meeting. The Fed currently is purchasing $65 billion in assets every month to try and drive down interest rates and stimulate the economy. It has signaled it would reduce or taper its purchases by $10 billion at each meeting this year, which would effectively end its purchase program by December. However, investors pricing in a federal funds rate hike in mid-2015 could get caught off guard, according to former Federal Reserve Governor, Robert Heller. Heller believes that markets will force the Fed to tighten a little bit earlier than that, probably around the turn of the year as we approach 2015, which is around the time that the tapering operation should be finished. The Federal Reserve has kept its benchmark interest rate near zero since 2008, when a global financial crisis that plunged financial markets into turmoil. As the Fed now unwinds its massive stimulus program and the U.S. economy recovers, markets anticipate an interest rate increase to follow not too long after the end of tapering. According to Heller, as investors become more become more bullish about the domestic recovery, yields on U.S. government bonds will be pushed higher, encouraging the Fed to follow suit. Other factors being taken into consideration are the recent weak U.S. economic data due to extreme weather conditions and new economic risks on the horizon, particularly China and Ukraine. Nevertheless, the general feeling is that Wall Street is reasonably comfortable with its outlook for Fed policy.

FOMC Statement/Press Conference @ 18.00 GMT

UK Budget 2014: Osborne Supporting A Resilient Economy

George Osborne will set out his plans to support a “resilient” economy in today’s Budget, which will be focused on boosting economic security and aspiration. The budget comes against a backdrop of a strengthening economic recovery, with unemployment and inflation falling and growth this year projected to be the among the strongest of any Western economy. Business groups have forecast that the UK’s total economic output will exceed its pre-recession peak in the second quarter of 2014 after the economy grew by 1.9% in 2013. Osborne is expected to address the UK’s historic economic weaknesses, particularly the need to increase manufacturing output and improve the UK’s balance of payments by boosting exports. He is also expected the chancellor to unveil schemes, incentives and tax breaks for some businesses. Alongside details of proposed tax and spending changes, Osborne will announce the Office for Budget Responsibility’s latest forecasts for economic growth and government borrowing for the years ahead. Deficit reduction remains his number one priority, with the ultimate goal of delivering an annual budget surplus before 2020.

Stocks: Google To Launch New Smartwatch Platform

Google announced earlier this week that smartwatches based on its Android mobile software will be available later this year, enlisting a variety of partners including Samsung Electronics, LG Electronics and Intel, signaling the company’s intent to play a leading role in what could be the next big computing market. Android Wear will allow people to speak into their watches to check sports scores, control music, send replies to text messages and even open their home garages. By aligning itself with a broad spectrum of partners to develop the smartwatches, Google is hoping to replicate the success that helped make its free Android software the most popular smartphone operating system, analysts said. Many believe wearable computers represent the next big shift in technology. More than 130 million smart wearable devices are predicted to ship by 2018.

That sums up today’s highlights! It’s a busy day on the markets so make sure you keep up to date with all the events via our Facebook, Twitter, Google+ and LinkedIn pages.

We hope you have a profitable day on the markets!

Just A Minute!

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary what’s happening in the markets today:

Main Trading Events Of The Day: Several today including USD FOMC Meeting Minutes @ 19.00; USD Building Permits & PPI m/m @ 13.30; GBP Unemployment Rate @ 09.30 GMT

Earnings Reports: N/A

WHAT WE’RE WATCHING TODAY

Dollar Drops To 7-Week Low Per Euro In Advance Of FOMC Meeting

Later today, Wall Street will focus on the minutes from the Federal Reserve’s last big meeting in January where the central bank voted to withdraw more stimulus from the economy. The minutes give investors a better sense of what Fed officials are thinking, though no big surprises are expected. The dollar has fallen to a seven-week low versus the euro in advance of the meeting as investors look for the stance of policy makers on recent economic data. The dollar is being sold especially against the euro according to analysts who remain wary of the downside risks to U.S. data. Investors will be looking for Fed’s view on the economy. The dollar was little changed at $1.3766 per euro at 2:34 p.m. in Tokyo from yesterday, after earlier touching $1.3773, weakest since Jan. 2. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was at 1,016.71 from 1,017.34 yesterday, set for the lowest close since Dec 17.

Home Construction Figure Likely To Be Down While PPI Gets A Re-Vamp

The housing market is regarded as one of the pegs supporting stronger U.S. growth in 2014. Figures released later are likely to show that new construction got off to a slow start in January. Economists predict construction on new homes dropped last month to an annual rate of 945,000, seasonally adjusted, from a preliminary 999,000 in December. The harsh weather conditions continue to gets lots of blame, but higher mortgage rates and home prices have also dampened demand. Some analysts also blame high student debt for holding back first-time home buyers. As recently as November, builders had broken ground on new homes at the fastest pace in six years. The rate of construction could pick back up again, however, as the weather warms and if the economy continues to improve.

Also today, the U.S. Labor Department will unveil a producer price index that has undergone its first dramatic makeover since 1978. The new PPI will include the wholesale cost of goods, as usual, and add services, construction, government and exports for the very first time. Services such as retail, finance, education and health care now represent a much bigger slice of the economy than goods-producing industries. As a result, the new formula will capture prices changes of three-fourths of all U.S. goods and services produced. The changeover is meant to make the PPI more relevant and act as an early warning signal for when the pace of consumer inflation is about to shift. However, the wholesale price report for January is unlikely to show much difference. The old PPI index found that wholesale inflation rose 1.2% in the one-year period from December 2012 to December 2013. The new PPI shows a 1.1% increase.

Is An iCar On Its Way?

Reports of a meeting between heads at Apple and electric car manufacturer Tesla Motors are sparking excitement in the tech industry and fuelling rumours that a potential ‘iCar’ is on its way. Although Apple is unlikely to be buying Tesla, a collaboration may well be in the pipeline with suggestions being made regarding the inclusion of an entertainment system in the car. A potential collaboration between the two firms could inject a much-needed burst of innovative spark back into the tech giant, which many complain has been lacking in recent times. Talk of Apple entering the auto market is not new. Last month Apple’s ‘iOS in the Car’ software was leaked, unveiling software specifically designed to link the iPhone to a car dashboard, according to media reports. The software would provide hands-free access to navigation, phone functions, messages and music through touch and voice control. The manufacturer’s Model S vehicle already features a large, tablet-like display, which is used to browse the web, and to navigate entertainment and sat-nav facilities, suggesting the potential some form of collaboration. According to reports, one of Apple’s key competitors Google has also been using its Android operating system to develop partnerships with Honda, Hyundai and Vauxhall. Shares in Tesla Motors, surged 3 percent on Tuesday following rumours of the acquisition and ahead of fourth-quarter and 2013 results to be released Wednesday. Meanwhile, Apple stock climbed 1.3 percent to a high of $551 before falling back to $545.99 by the end of the trading day.

That sums up today’s highlights! We hope you have a profitable day on the markets.

Dollar Rises Against Most Peers on Fed’s Tapering

And thus it begins! The Fed’s tapering of stimulus that is. After economists’ expectations were disappointed when the Fed refrained from tapering in its September and a government shutdown that threatened to blow up in the air the entire economy of the U.S., the Fed decided yesterday to lower its bond-purchasing budget to $75 billion.

Following the decision the dollar gained against most of its 16 major peers. Currencies, however, did not swing as much as traders anticipated as the Fed highlighted that it intents to keep borrowing costs low for longer. After a four-month slump against the dollar, the yen regained some of its strength yesterday. Japanese policy makers started their meeting early this morning which will decide the future of Japan’s Quantitative Easing into the new year. The euro, however, dropped before discussion regarding a planned banking union began at a summit of European Union leaders.

Many economists see the Fed’s decision to begin tapering now as an entryway into a more stable and normal monetary policy for the future.

At the end of its meeting yesterday, the Federal Open Market Committee announced that it would cut its QE programme from $85 billion to $75 billion, a commitment that promises to slowly remove the unprecedented stimulus set in place by the Fed Chairman Ben Bernanke to ease economic recovery from the worst crises since the 1930s recession.

Policy makers were also quick to assure the public that the benchmark rate would likely remain low “well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below” the goal of 2 percent. The rate for federal-funds has remained within the narrow range of 0 to 0.25 percent since the crisis hit the U.S. in 2008.

Markets Shift in Anticipation of Fed Decision

Another Fed decision, another craze on the market. It seems to be becoming a trend this month that every time the Fed meets or one of the policy makers speaks the markets go hay-wire as investors and speculators wage bets on the future of U.S. economy. The FOMC has been in meeting since yesterday and will announce its decisions later today, but the anticipation of the announcement has already sent the markets spinning out of normal trajectory.

Both European and U.S. stock futures gained along with Asian equities, while the currencies of emerging markets devalued and copper dropped before the Federal Reserve announces a possible taping of stimulus to begin this week. Indian shares, however, increased after the country’s central bank came to the unexpected decision not to raise interest rates.

The main issue on the table at the current FOMC meeting is the programme for reducing the $85 billion monthly bong-buying programme. At the end of their last meeting policy makers said they would like to see “more signs of a strength” in the U.S. economy before tapering, and the data for last month has certainly leaned that way. Whether will consider them enough for tapering however, still remains to be seen.

Mexican Peso Drops Most On Fed Tapering Speculatiosns

Speculations that the Federal Reserve will put a tapering programme for its stimulus in place at the end of its meeting tomorrow have caused drops on various currencies, but the most steep one among the world’s major currencies was seen in the Mexican peso.

The peso lost 0.4 percent against the U.S. dollar, while profits on fixed-rate peso bonds that will mature in 2042 gained 4 points or 0.04 percent. The 0.4 percent increase the peso had last week after the Mexican congress passed a bill ending the state oil monopoly has only short-lived.

A survey conducted by Bloomberg, showed that 34 percent of economists expect the Fed to begin curbing its monthly $85-billion bond-purchasing programme at its meeting on 17th-18th December, compared to only 17 percent in a poll held on 8th November.

Yesterday data showed that industrial production in the U.S. expanded 1.1 percent in November, compared to a revised 0.1 percent in the previous month that had originally been reported as a decrease, according to a report from the Fed today. Economists surveyed earlier had expected a 0.6 percent increase. The index of industrial production overall rose to 101.3, for the first time surpassing the levels it held in 2007 before the recession hit.

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