Bernanke ties
interest rates to unemployment

Yesterday, following a two-day Federal Open Market Committee
meeting, Ben Bernanke announced that he will extend the current bond buying
scheme designed to lower borrowing rates, by a further $45bn per month. Although
expected, the move heavily weakened the dollar against its counterparts as this
form of quantitative easing increases the money supply, lowering the value of
the currency.

Bernanke ties
interest rates to unemployment

Yesterday, following a two-day Federal Open Market Committee
meeting, Ben Bernanke announced that he will extend the current bond buying
scheme designed to lower borrowing rates, by a further $45bn per month. Although
expected, the move heavily weakened the dollar against its counterparts as this
form of quantitative easing increases the money supply, lowering the value of
the currency.

Continuing Bernanke’s aggressive stance towards combatting
the economic problems that face America, the Fed Chairman took further,
unprecedented action with the interest rates, despite keeping them at historic
lows.

Typically interest rates are set with a view to controlling
inflation levels within an economy, in an unexpected but very logical move,
Bernanke has also tied America’s interest rate to the unemployment rate.
Currently at 7.7%, it was suggested that interest rates would not budge until
the jobless rate falls to 6.5%.

Gaining from the dollar weakness, the euro regained some of
the ground that it had lost following Mario Draghi’s press conference last
week. Agreeing an oversight deal, EU finance ministers gave the ECB responsibility
of all euro area lenders, enabling the firewall fund created to provide direct
bailout to banks.

Elsewhere in Japan, the yen dropped to a nine-month low as
the national elections approach. Shinzo Abe, the opposition leader in favour of
unlimited easing, is expected to win the vote.

 

Today’s Key
Announcements:

• 09.00am – EUR – ECB Monthly Bulletin
• Day 1 – EUR – EU Economic Summit
• All Day – EUR – Eurogroup Meetings
• 11.00am – GBP – CBI Industrial Order Expectations: expected
  at -17
• 13.30pm – USD – Core Retail Sales m/m: expected to increase
  to 0.5%
• 13.30pm – USD – PPI m/m: expected to fall to -0.5%
• 13.30pm – USD – Unemployment Claims: expected at 368k