Fiscal cliff
discussion resumes

Today starts the two day Federal Open Market Committee
meeting in the US, it is expected that the event will conclude with an
announcement to increase the levels of quantitative easing.

Expiring this month, it is believed that Bernanke and his
counterparts will prolong Operation Twist, an initiative designed to lower
long-term interest rates. Lower borrowing rates spur both investment and
consumption, which would aid the timid recovery of the world’s largest economy.

Fiscal cliff
discussion resumes

Today starts the two day Federal Open Market Committee
meeting in the US, it is expected that the event will conclude with an
announcement to increase the levels of quantitative easing.

Expiring this month, it is believed that Bernanke and his
counterparts will prolong Operation Twist, an initiative designed to lower
long-term interest rates. Lower borrowing rates spur both investment and
consumption, which would aid the timid recovery of the world’s largest economy.

An extension of the scheme would increase the money supply;
therefore with speculation the Fed will push its balance sheet to hold nearly
$4tn assets, if correct investors are likely to sell their dollars before the
currency devalues further.

US lawmakers resume discussions today over the country’s
impending fiscal cliff. Stating that he was ready to come to an agreement,
President Barack Obama will once again engage with Republican House Speaker
John Boehner, who last week criticised the President’s urgency in addressing
the matter.

On the continent, Eurogroup meetings commence this morning
as respective leaders try to put forth a strategy to help pull the euro zone
from its current recession. Key sentiment estimates from Germany may also help
outline whether or not the ECB will move further towards an interest rate cut,
a move that would cause the euro to weaken against its peers.

Key Announcements
Today:

• All Day – EUR – Eurogroup Meetings
• 10.00am – EUR – German ZEW Economic Sentiment
• 13.30pm – USD – Trade Balance