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.

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