Daily Market Report 12/12/12

Fed to potentially announce further QE

Important meetings on both sides of the Atlantic sees Europe’s leaders assemble to discuss current events, including the positive news that Greece achieved its bond-buyback targets, whilst in the US the Federal Open Market Committee meets for its second day as speculation mounts that it will implement further stimulus.

The most impacting of the two will be the developments from the US, as Ben Bernanke may look to add to the previous programme, Operation Twist, which lowers long term borrowing rates by purchasing long-term bonds whilst simultaneously selling short-term bonds.

It is expected that such an announcement will weaken the dollar, putting it under further downward pressure that has seen the greenback depreciate nearly ¾% since the end of last week.

In Washington, President Obama and Republican House Speaker John Boehner are locked in discussion over another topic contributing to the dollar’s decline, the US fiscal cliff.

Both Republicans and Democrats will be looking to make progress in negotiations without surrendering much ground for their respective party, a catch-22 situation that has seen the solution protracted well into December.

If we continue in the same vein, the dollar could expect further weakness, however as we get closer to announcements in both, the peak will become difficult to gauge. This current level represents a weak dollar considering the poor performances of various economies around the world; therefore it may be an opportune time to purchase dollars before the currency strengthens.

 

Today’s Key Announcements:

  • All Day – EUR – ECOFIN Meetings
  • 09.30am – GBP – Claimant Count Change: expected at 5.9k
  • 09.30am – GBP – Unemployment Rate: expected to marginally increase to 7.9%
  • 10.00am – EUR – Industrial Production m/m: expected to improve to 0.3%
  • 13.30pm – USD – Import Prices m/m: expected to fall to -0.4%
  • 17.30pm – USD – FOMC Statement
  • 17.30pm – USD – Federal Funds Rate
  • 19.00pm – USD – FOMC Economic Projections

 See previous Daily Market Reports