Lack of faith in the euro results in decline in global markets

Yesterday, the global markets declined due to negative investor sentiment and faded hopes for the euro.

Despite a European summit deal aimed at strengthening euro zone budget discipline, confidence was not restored to the financial markets on Monday, so the European Central Bank (ECB) was once again required to intervene.

Bonds hit record highs again, and euro trading saw both the USD and GBP increase sharply.

Today we will see further short term bills offered by both Spain and Greece and the outcome of these sales are likely to expose negative investor sentiment and a lack of consumer confidence in euro nations in the periphery.

The euro markets revealed that last week’s talks were insufficient in bolstering government balance sheets and that both Germany and the ECB need to reaffirm their commitment to stand behind the sovereign debt crisis.

This week we expect a further landslide in the euro, and when the currency hits record lows we expect that Germany will finally commit to and stand behind the debt laden countries.

Fed predicted to buy $545 billion in home-loan debt

In the US today, Chairman Bernanke and his fellow policy makers are likely to start another round of Fed asset purchases for quantitative easing next quarter. The Federal Reserve System (Fed) is due to buy $545 billion in home-loan debt, a figure which is based on the median of firms that provided estimates.

The fed will also hold its final policy meeting of 2011 today, where it is anticipated that the Federal Reserve officials will use the time to finalise their strategy as to how they will more explicitly communicate changes in interest rates.

While numerous private economists are not anticipating any significant announcements following the meeting, a majority believe that Fed officials are effecting a plan that is to forecast the direction of short-term rates at the start of next year.

Such a forecast would provide assurance to investors, companies and consumers alike that there would be no rate rises before a specific time.

It is possible that the Fed’s new communications strategy could be made public as early as next month following its next policy meeting on the 24th-25th January 2012.

Economic Data

  • The UK Consumer Price Index (MoM) for November is predicted to fall below the previous market level of 0.1%. CPI (YoY) (Nov) is also predicted to fall from 5%, but it is still 0.2% above consensus level. Both of these results are likely to negatively affect GBP.
  • The UK Core Consumer Price Index (YoY) for November, which excludes seasonally volatile products such as food and energy, is predicted to increase from the previous market position of 3.4%, which is likely to have a positive effect on GBP.
  • In the US the FOMC monetary policy meeting will take place at 19.15 GMT and analysts do not expect any significant action on the part of the Fed, due to the recent improvement of economic data and the continuing instability of the situation in Europe. The Fed Interest rate decision should remain at 0.25%.
  • US Retails sales (MoM) are predicted to fall from the previous market position of 0.5%, which will presumably have a negative effect on the USD. Yet The Retail Sales ex Auto (MoM) are predicted to increase from the previous market level 0.6%, which 0.1% above the consensus level.
  • Germany’s ZEW Survey – Economic Sentiment (Dec) is predicted to fall below the previous market level of –55.2 which is likely to have a negative effect on the Euro.

To get a live rate login to RationalFX now or call to talk to one of our dedicated dealers +44 (0)20 7220 8181


Instituions named in this article:

ECB: European Central Bank- The institution of the European Union (EU) which administers the monetary policy of the 17 EU Eurozone member states.

http://www.ecb.int/home/html/index.en.html

Fed: The Federal Reserve System is the central banking system of the United States which is known as the Federal Reserve or informally as the Fed.

http://www.federalreserve.gov/aboutthefed/default.htm

Yesterday, the global markets declined due to negative investor sentiment and faded hopes for the euro.

Despite a European summit deal aimed at strengthening euro zone budget discipline, confidence was not restored to the financial markets on Monday, so the European Central Bank (ECB) was once again required to intervene.

Bonds hit record highs again, and euro trading saw both the USD and GBP increase sharply.

Today we will see further short term bills offered by both Spain and Greece and the outcome of these sales are likely to expose negative investor sentiment and a lack of consumer confidence in euro nations in the periphery.

The euro markets revealed that last week’s talks were insufficient in bolstering government balance sheets and that both Germany and the ECB need to reaffirm their commitment to stand behind the sovereign debt crisis.

This week we expect a further landslide in the euro, and when the currency hits record lows we expect that Germany will finally commit to and stand behind the debt laden countries.

Fed predicted to buy $545 billion in home-loan debt

In the US today, Chairman Bernanke and his fellow policy makers are likely to start another round of Fed asset purchases for quantitative easing next quarter. The Federal Reserve System (Fed) is due to buy $545 billion in home-loan debt, a figure which is based on the median of firms that provided estimates.

The fed will also hold its final policy meeting of 2011 today, where it is anticipated that the Federal Reserve officials will use the time to finalise their strategy as to how they will more explicitly communicate changes in interest rates.

While numerous private economists are not anticipating any significant announcements following the meeting, a majority believe that Fed officials are effecting a plan that is to forecast the direction of short-term rates at the start of next year.

Such a forecast would provide assurance to investors, companies and consumers alike that there would be no rate rises before a specific time.

It is possible that the Fed’s new communications strategy could be made public as early as next month following its next policy meeting on the 24th-25th January 2012.

Economic Data

  • The UK Consumer Price Index (MoM) for November is predicted to fall below the previous market level of 0.1%. CPI (YoY) (Nov) is also predicted to fall from 5%, but it is still 0.2% above consensus level. Both of these results are likely to negatively affect GBP.
  • The UK Core Consumer Price Index (YoY) for November, which excludes seasonally volatile products such as food and energy, is predicted to increase from the previous market position of 3.4%, which is likely to have a positive effect on GBP.
  • In the US the FOMC monetary policy meeting will take place at 19.15 GMT and analysts do not expect any significant action on the part of the Fed, due to the recent improvement of economic data and the continuing instability of the situation in Europe. The Fed Interest rate decision should remain at 0.25%.
  • US Retails sales (MoM) are predicted to fall from the previous market position of 0.5%, which will presumably have a negative effect on the USD. Yet The Retail Sales ex Auto (MoM) are predicted to increase from the previous market level 0.6%, which 0.1% above the consensus level.
  • Germany’s ZEW Survey – Economic Sentiment (Dec) is predicted to fall below the previous market level of –55.2 which is likely to have a negative effect on the Euro.

To get a live rate login to RationalFX now or call to talk to one of our dedicated dealers +44 (0)20 7220 8181


Instituions named in this article:

ECB: European Central Bank- The institution of the European Union (EU) which administers the monetary policy of the 17 EU Eurozone member states.

http://www.ecb.int/home/html/index.en.html

Fed: The Federal Reserve System is the central banking system of the United States which is known as the Federal Reserve or informally as the Fed.

http://www.federalreserve.gov/aboutthefed/default.htm