U.S. Markets Hang in the Balance
Justin Burkhardt | FXFocus.com [7]
Response required: the market looks to Bernanke. The USD slipped against other major currencies today as traders cautiously await the outcome of the FOMC’s meeting scheduled for Thursday. Market expectations? Another round of QE3…
The economy is slowing due to the effects of the European debt crises, and the market is looking for some kind of intervention to bolster the country’s economic outlook. According to a Reuters poll, economist speculate that there is a 60% chance that the Fed will announce additional stimulus this week.
Federal Chairman Ben Bernanke made a strong case for more easing in his Jackson Hole speech last month so the outlook is positive. IF the Fed declines additional easing then it could send the markets into a tailspin especially due to the fact that the EU just got the “green-light” on the European Stability Mechanism (ESM) from the German courts.
The “unknown” for the Fed is the level of impact that another round of quantitative easing will have on the economy. If the country’s economic problems are structural, for example, than it won’t matter how much money they throw at it, because a restructuring is the only thing that would establish balance.
Traders Insights:
Caution is key. My personal preference is to be out of the market prior to the outcome of events like this. The directional thrust that will follow the release of this data is unpredictable at best. It’s better to hedge your risk and let the market decide what it wants to do, then take a position. Trading should not be a gamble, if it is, rethink your strategy.
Get ahead of these turbulent markets; join the Forward Thinking waiting list today [7].
High Impact Indicators on Watch
- EUR EU to Announce Details of Banking Union (Wednesday)
- EUR German Constitutional Court Announces ESM Ruling (Wednesday)
- USD Initial Jobless Claims (Thursday)
- USD Producer Price Index (Thursday)
- USD FOMC Rate Decision (Thursday)
- USD FOMC to Release Projections of the Economy and Fed Funds Rate (Thursday)
- USD Fed’s Bernanke Holds Press Conference (Thursday)
- EUR Consumer Price Index (Friday)
- USD Advance Retail Sales (Friday)
- USD Consumer Price Index (Friday)
The FOMC statement should be released on Thursday at 12:30pm – FOMC Calendar & Statements [8]
Your currency analyst,
Justin Burkhardt
[7]
