Fed Fun!

Today all eyes and ears are on the FOMC meeting and the new format, where Fed Chairman Bernanke will hold a Q&A session after the release of the interest rate decision. So make not of the time changes, as the rate decision has been moved up to 12:30 EST, with the press conference to follow at 2:15 EST, which was the old rate decision time.

It will be extremely interesting to say the least to see how this goes and whether or not Bernanke is a better salesman than the market believes. It is no secret that QE2 has been wildly unpopular with the public and that indeed it has been responsible for higher commodities prices despite the intellectual dishonesty surrounding that fact.

However, what QE2 has also done is help stabilize asset prices so that the economy did not become over-ridden by deflation.

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Fed Mulls End to Easy Money

Forex traders have very suddenly tilted their collective focus towards interest rate differentials. Given that the Dollar is once again in a state of free fall, it seems the consensus is that the Fed will be the last among the majors to hike rates. As I’ll explain below, however, there are a number of reasons why this might not be the case.

First of all, the economic recovery is gathering momentum. According to a Bloomberg News poll, “The US economy is forecast to expand at a 3.4 percent rate this quarter and 3.3 percent rate in the second quarter.” More importantly, the unemployment rate has finally begun to tick down, and recently touched an 18-month low. While

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Weekly Review and Outlook: Dollar Broadly Lower as Markets Prepare for More Easing from Fed

Dollar Broadly Lower as Markets Prepare for More Easing from Fed

Dollar was broadly lower last week as poor non-farm payroll report intensified speculation that Fed will re-start the quantitative easing program in this week’s meeting. Dollar index dropped to as low as 80.08 before closing at 80.41. Indeed, it was the ninth consecutive week of decline in the index, which was the worst losing streak since 2004. EUR/USD breached 1.33 level briefly before closing at 1.3278 while USD/JPY dived to 85.01, inches above 2009 low of 84.81. The Japanese yen continued to stay in range against most currencies, except dollar, as stocks maintained gain in spite of poor job data. Meanwhile, Canadian dollar lagged behind other majors for it’s own poor employment data.

Positive US data from early part of the week was overshadowed by the disappointing non-farm payroll report.

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