If we recall the middle of 2009, one of the hottest debates among traders and economists was revolving around the subject of US economy experiencing inflationary or deflationary pressure. Many experts expected that, following the unprecedented central banks’ expansionary money supply policies, the G7 countries would witness a rapid increase in the level of prices. Exactly like the first half of 2009, the US CPI during the 1H10 has hovered near the flat line. Moreover, the all-item inflation numbers shifted into negative territory when oil went through a price correction. The annualized core inflation rate from December 2009 to May 2010 stands at only 0.3%, the tamest five-month annualized rate since early 1960s. If things remain status quo, is US in danger of turning into a Japanese non-inflationary experience? Continue reading ‘Back To Safe Heaven’
Tag Archive for 'FED'
Today, before the markets opened in New York, there were plenty of encouraging signs coming from both fronts: corporate earnings and economic indicators. However, Dow Jones index lost 1 percent by the end of the trading day. One could say that the old “buy the rumor sell the news” has prevailed. Early morning, we found out that the sales of existing US homes surged a record 9.4 percent in September. Even though the number is extremely bullish, one should notice that half of the transactions were basically foreclosed properties. According to S&P, there are $408 billion in mortgages more than 90 days overdue and $332 billion in home loans that have been foreclosed or written off by lenders. Continue reading ‘The State of Global Recovery’
As we recall, the US dollar reached relative highs in March after its 24% rise from the 2008 lows. While the recent sell-off has been across the board, losses against commodity currencies have been pilling-up. The Australian and New Zealand dollars are each up more than 20%, and the Canadian dollar has gained 16%. There have been two distinct waves to the dollar’s recent weakness. Initially, the dollar sell-off was driven by investors looking for signs of global economic recovery. As confidence increased, investors rushed into buying risky assets, and abandoned safe-haven U.S. government bonds and the dollar. Then, toward the end of May, investors became worried about the potential for a downgrade of the U.S. sovereign-debt rating and sold-off the dollar again. Let’s address few fundamental aspects within the FX space. Continue reading ‘Fundamental FX Triad’
These days, all over across the Wall Street and academia, many economists touch an extremely hot topic days: the quantitative easing policy. The world economy is facing the toughest recessionary pressure since the Great Depression and that calls for an unprecedented monetary policy from the central banks. Since June 29th 2006, when the federal target rate reached 5.25 percent, Federal Reserve has engaged into a monetary easing policy that took the benchmark interest rates in the vicinity of zero. Similarly, Bank of England has reduced the benchmark rate to half a percentage point, and European Central Bank adopted a dovish stance with interest rates down to historical low levels of 1 percentage point. On top of that, Fed has injected massive amount of liquidity into the financial system through the discount window loans, term-credit loans to banks and currency swaps to foreign central banks. As an extraordinary set of measures, from the beginning of the year Federal Reserve has announced two special programs: a program to purchase up to $300 billion of longer-dated Treasury securities and a program to purchase $1.25 trillion of agency mortgage-backed securities. Continue reading ‘FED’s Quantitative Easing’
Recent Comments