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What Does The Market 'Expect' From The Fed/ECB?
While hope remains, Citigroup's Steven Englander notes that the much stronger than expected ADP has probably shifted market expectations towards neutral, but like us he believes the market remains more hopeful of an aggressive fed than wary of disappointment. In parentheses below, we indicate what we think will be negative, neutral and positive surprises from an investor viewpoint.
Fed:
- Negative surprise – downgrade of forecast but nothing much else in way of change from last statement; no nod to any near-term move (15% probability)
- Neutral – economy disappointing, extension of zero-rate horizon to mid-2015, will act soon if data continue to come in soft (60% probability)
- Positive – open to balance sheet expansion, other stimulatory policies, strong September signal (25% probability)
The zero-rates till mid-2015 is probably largely priced in even after ADP (but not fully priced in, Figure 1) so there may be small further gains if FOMC crystallizes that expectation in the statement.
The impact is becoming more of a statement of desire (the Fed’s wishlist) than anything they can implement or commit to, since few of the current voting members are likely to be around then. So it is far stronger if they show an open door to balance sheet expansion in September in addition to putting out an increasingly conditional and non-binding forecast.
ECB:
- EUR Negative surprise – no action; vague comments on what they can do in the future; ‘no monetary solution to fiscal problems (20% probability)
- Neutral – SMP under close consideration; coordinated with EFSF; joint CB and governmental measures will be introduced; can be implemented anytime but not immediately (45% probability)
- Positive surprise – SMP will be restarted immediately or very soon; or other policy measure that explicitly support long end of peripheral bond market (35% probability)
We think that FX investors are jumping between the ‘neutral’ and ‘positive surprise’ fenceposts. As per Dickens, ‘dishonesty will stare honesty out of countenance any day in the week, if there is anything to be got by it’, but there is simply no percentage in central bankers sending a market–moving policy message that will be reversed within a week. If they do so the outcome will likely be worse than had they kept silent in the first place. So while we think ‘neutral’ in the market sense does not require actual SMP buying by the ECB, we would assign more likelihood that there concrete indication of a policy shift, even if the Bundesbank is expressing reservations.
Importantly, we also think that SMP buying would be EUR positive and positive for risk-correlated currencies. The EUR and S&P have moved in the same direction 14 of the last 20 days and 29 of the last 43, so the near-term EUR reaction will probably be driven by whether investors view the ECB policy move as risk positive or not. This is still controversial in the market so there may be some knee–jerk sellers if the ECB announces its own form of QE, but we continue to read the evidence as suggesting that risk-positive is EUR positive.
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Extension of ZIRP to 2150, perhaps.
Right, because common sense tells you that there is no real cost for the creation of capital out of thin air < sarc off >
While they are at it, my company would be happy to be the first beneficiary of NIRP. I'll do my part and the banks will be happy to know that I am willing to let them pay me in order to loan me money. "Winning"
Here comes the retest of 1422.
So why did silver get crushed today if the news forecast is generally positive?
Perhaps he is talking about the year 1422 and the age of robber barons? Just a guess.
Bernanke figures that legalization of pot will help Americans get more comfortable with the "new math".
With the "new Meth"
Fixed it for ya.
If there are no open market purchases, or they are small, silver wil go nowhere at best.
Silver gets crushed because big players sell a lot of paper silver, that's always the reason. Why they sold the paper shorts is the real question.
Maybe they are front running the Fed, heaven forbid that someone leaked information, but it might have happened (sarc)
Maybe they're just playing some mind game being the evilmanipulators that they are.
The wierd algo activity and the emini dump makes me tend toward option 1 but if the Fed and ECB surprise toward easing I think 1422 is conservative. 1460 looks to be a turnaround level. The higher it goes the harder it will fall.
If there was no "paper" market for silver, it would trade at $6 / ounce.
Another great call! How's those bulltard longs workin' out for ya, monkey?
Perfect: No job creation through 2015 (no jobs can be created in a zero intrest environment)
That means tax revs are even further along to zero collection. NIRP is near.ICW
ZIRP ad infinitum bitchez.
I am surprised market is pricing in everything, except recession
http://www.freefdawatchlist.com/2012/07/ecb-has-two-days-to-save-euro-thats.html
When the Fed says they see "growth", that means they will be pulling out the big guns in order to keep the ship upright. That means monetization, higher prices, and nominal GDP growth, end of story.
Of course, it also means the Fed is even further backed into it's bubble blowing corner now that everyone is loaded up with junk bonds. But, might be a looongg time before the dam breaks.
I'd like $1,200,000,000,000, immediately.
I 'd like demand $1,200,000,000,000 immediately.
Fixed it for ya. :>)
A Merrr-cehh-dehhhs-Benz would also be nice. And a chimp that rides a tricycle and eats Xanax.
Janis Joplin - A little ahead of her time I would say.
Oh lord won't you buy me a Mercedes Benz.
My friends all drive porsches, I must make amends.
Worked hard all my lifetime, no help from my friends.
So oh lord won't you buy me a Mercedes Benz
Oh lord won't you buy me a color TV.
Dialing for dollars is trying to find me.
I wait for delivery each day until 3.
So oh lord won't you buy me a color TV.
Oh lord won't you buy me a night on the town.
I'm counting on you lord, please don't let me down.
Prove that you love me and buy the next round.
Oh lord won't you buy me a night on the town.
Everybody....
Oh lord won't you buy me a Mercedes Benz
My friends all drive porsches, I must make amends.
Worked hard all my lifetime, no help from my friends.
So oh lord won't you buy me a Mercedes Benz.
http://www.youtube.com/watch?v=7tGuJ34062s
I have that album on reel-to-reel tape. Sounds pretty good on a 1969 Sony player (pawn shop, $4) through a Harmon/Kardon amp (yard sale, $10). Janis J., Hunter T., and Frank Z., the doomed-clown-prophets of our times.
ELA for Italy and Spain ?
Remember when you could actually invest in a company? Study its fundamentals and make an informed decision on its prospects? It's so sad to think that world only exists as nostalgia.
Yep, now the only way to judge an -investment- is 'ability to resist coming collapse' and 'does it get FREE MONIES?'
The best analysis now is a Google search of the largest investors and the officers. Use a seven-degrees-to-Kevin-Bacon analysis for crony connections. I'm half joking but I suspect if someone actually did this you would find some disturbing results. If you did this in reverse by starting with the most prosperous companies you might find who the central players in the Ponzi are, the infamous they that we always talk about.
Not entirely. You can still long / short. Long Apple / short Zynga would have been phenomenal.
Dear Jesus:
Please give me some QE.
Regards,
Wall Street.
They are getting very close to needing that miracle moment.
Yes indeed.
I don’t know what the market will get, but here is what it needs..
http://i48.tinypic.com/dqm0di.jpg
He already through their sorry asses out of the temple and called them a den of thieves some 2000 years ago.
They guy they're looking for is Mephistopheles. (Faust)
Dump, pump and pray.
Fed doesn't QE then there is only one place the Euro is going this week.
They can run on for a long time.....
With folded hands...that's so passe....how about bended over?...or in swallow mode....thrusted down one's throat is more like it..../sarc
I predict the Dow will cross the 13,000 level before the end of the year. Again. That is only one prediction and it is based on Fed expectations.
who fucking cares what they do.
THEY CANT FIX THE CURRENT DEPRESSION IN EUROPE AND RECESSION IN THE US, WHICH WILL DESTROY EARNINGS.
There is no question about that.
earnings they can still fake. REVENUE is the line that doesnt lie.
If you are inflating money supply rapidly enough, earnings don't matter. Buy anything to get rid of your dollars.
"No...I expect you to die, Mr Bond."
-Goldfinger circa 1964 AD
So the very WORST anything can get is 'neutral' then...ah yes I see.
But in Wall Street code, NEUTRAL SUCKS.
i expect the unexpected..lol
Fed Statement: "We believe there is no reason for not failing. Barring that, aggressive neutrality has a 60% chance of balancing out the VWAP swap such that while domains of opposition are global, preliminary data indicates that statistical analysis remains firmly based in heuristically based algorithms which create liquidity. You're welcome."
No QE, instead Fed hires 500,000 people to get unemployment under 8%
"You work for the Fed? Really? What do you do?"
"I'm responsible for maintaing the crack pipes."
Just got hired...Bath Salts procurement team.....wahoooooooo...I'l be rich!
Moving on up, to that delux apartment in the sky!
Cc
Extension of ZIRP until 2020, talk of NIRP (Negative Interest Rate Policy) to further inflate housing bubble II, quavering Ben issuing a stream of nebulous promises of "measures" from his empty six shooter (.22 caliber).
I doubt Bernank would do NIRP. Too much political danger as the banks would start charging customers to pay for keeping their money at the bank. I'm sure that BB is well aware of this and him being under Obummers watch, Obummer would get the blame.
Wake up!!! The yeild on several TIPS already negative.
What are the odds of Bernanke dumping a truckload of bleach into the swimming pool and announcing a new fed funds rate of 20%, effective immediately?
I mean think about it. When your SimCity map goes to shit, do you just muddle through? NO. You select Disasters -> Riots and grab a beer.
If he had a brain transplant with Volcker, maybe. But even Volcker wouldn't do it like that.
Upping the FF rate to 4% over 8 quarters might actually do some GOOD. This ZIRP is killing retirees, rotting capital from the inside out, and it Doesn't Work. But a neutral Fed interest rate policy is pipe dream at this point.
Killing retirees is part of the plan: the bankrupt banana republic of the USA has got to save on entitlement spending.
Would this be the same "entitlement" that is deducted from my fucking check? If you are talking about social security, you better stop making me pay for it before you call it an "entitlement". Dumbass.
Can someone please just drag Bernanke out of his limo and kick him in the ball sack for me? He's been doing it to me for the better part of five years save the limo.
I don't want to hear the term "shared sacrifice" after watching this shit happening.
Hah, are they worried about saving a rigged stock market? I don't think there are enough humans left in the market to make a difference. After this morning's algo gone wild episode, the markets suddenly calm to nothing. No volume. Barely any price changes going on right now. How long has it all been fake?
+ 1
Maybe that was one of Bernanke's tools he doesn't describe anymore. Maybe it all came from the FED's computer. They can just print up the loses.
years
INO.com Markets - Chart for U.S $ INDEX (NYBOT:DX)
here's the dollar at the top of the recent channel b4 the FEDspeak, with the EUR down 1 pubie
they can either take this clear of the channel top or drop it back to 82.5, no sweat
my guess is they will disappoint AND drop the dollar to 82.5 (counterintuitively, i know, but these are world-class banksters, here) goosing to DOW indies to 13100
why? b/c it is "stability" + good for the 'markets' & EU banksters' needs re: checks in mail
the other choices seem to be
They let yields rise to goose up the market.
true bird-speak
but i know you aren't one to crow
That centralism in dealing with the crisis is ineffective, seems obvious.
Could it be also causal?
How the hell printing more euro's is euro positive has been beyond me for some time, but hey ho...
Bernake this very moment:
Dear God, make me a bird, so I can fly far, far away from here.....
Bernanke Performs another Miracle: Gospel according to Mark (Zandi)
This was a needy crowd. They could not feed themselves or each other. They could not heal themselves or each other. Bernanke was moved with pity and was ready to provide them all that they needed. The Austrians wanted to send them away to fend for themselves. But no, the Keynesian and His Holiness Bernanke called everyone together at 4:15 (eastern time):
Bernanke spoke, "They do not need to go away. My Keynesian disciples, we'll give them something to feed on."
"We already gave them 15 trillion in debt and interest rates at zero" they answered.
"Bring them here to me," the Bernanke said.
Bernanke directed all the CNBC Keynesian shills to sit down on the floor. Taking the fiat paper in his hands, he looked up to the portrait of Greenspan hanging on the wall, and gave thanks and broke out the printing press. "Print" he commanded and the fiat spewed forth. The bankers and traders all sighed in relief and danced around and were satisfied.
I'll be suprised if they announce more QE this close to the election, but it's in the post.
They can create capital out of thin air? I thought they could only create clown bucks.......
Looking for a big nothing.
No new QE. ZIRP to 2015.
The "surprise" will be how the PPT scoops up ES after the Fed disappoints and sends it skyward in one of those typical headscratching moves. they know no new QE so the PPT is on full scale alert. just a thought maybe I'm crazy. Bernanke wants to try and convince you the markets are not junkies.
It sure looks as if the Fed is starving out Owebombya. Which only makes me worry more than ever about Romney.
Axelrod and Jarret must be carrying a couple of heavy pant loads.
The retail investor is no longer confident in the manipulated stock market...or in the lousy housing market.....debt deleveraging is the all the rage.
Aaaaand it's Gone! Fed's won't change shit, there just forcasting at this point. Monitor and tweek as they go.
The End...
PS. I dare you to buy any dip. I Double dare.
That was it?!?!?! Summation "same shit different day, you are very welcome." Fuck, I coulda done that...
LOL! I don't think they shut the LEER down for that message.