Tag Archives: tapering

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.

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!

Misjudging the Fed’s Tapering: The Importance of Fundamental Analysis

We always stress the importance of fundamental analysis on our main website and informative videos we produce for our traders and followers, but today’s news illustrates the importance of this aspect of binary options trading in a grand real-life paradigm of immense proportions.

One of the major market moving events of 2013 had been the Fed’s decision to taper its Quantitative Easing programme. The decision, as you probably remember, was preceded my rumours and false alarms and vague language of “more growth” and “stability” in the U.S. economy that kept investors and traders on their speculating toes.

When the decision finally did come last month, at the end of the December FOMC meeting, not everyone expected it, not even the “ol’ boys” of trading. Money manager Bill Gross, known as the “Bond King” misjudged the Fed’s intentions to begin scaling back the economic stimulus in 2013, causing the Pimco Total Return Fund (PTTRX) to decline the most in twenty years.
And the billionaire was not the only to commit the error. The biggest funds at Pacific Investment Management Co. also followed in the same footsteps including in offerings of non-traditional bonds that have been especially designed to protect investors from interest-rate fluctuations.

This is not to argue that you should heed the advice of professional traders and money managers. What we rather like to emphasize is that one should always follow the financial and world evens closely and come to his own conclusions and predicted aided by the advice of experts, but without blindly following them.

Indices Hit Record Highs on Soaring Stocks

Benchmark indices hit record highs as stocks rallied yesterday, while Treasuries slipped, after the Federal Reserved announced it had gained sufficient confidence in the job market to begin tapering, promising to keep interest rates low. Both the U.S. dollar and commodities gained on the market.

The Standard & Poor’s 500 Index (SPX) climbed 1.7 percent, its biggest advance in 8 weeks, and the Dow Jones Average (INDU) surged 292.71 points. The U.S. equity volatility benchmark gauge lost the most since October. The dollar skyrocketed to a five-year high against the yen and gained against most of its major peers.

Equities have been taking hits on all sides since May, when Bernanke announce that a tapering programmed would likely start this year. The S&P 500 plunged 5.8 percent in the period from 21st May through 24th June. After the Fed shocked the markets with its decision not to taper in September, the index regained lost points and set new highs.

The index had lost 1.5 percent from its last record reached on 9th December, on the speculation that improving U.S. economic data would prove sufficient for tapering to begin. The S&P has climbed a total of 27 percent this year, the mist since a 1997 surge of 31 percent.

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