Mike Paterson’s Daily Forex Brief
Fed Chairman Ben Bernanke yesterday delivered the much anticipated monetary easing, aka QE3, and we’ve seen further USD weakness as traders fully assess his action and statements.
The Federal Reserve said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt (Mortgage Backed Securities) a month in a third round of quantitative easing as it seeks to boost growth and reduce unemployment.
In an additional move however he announced that there would be no limit to the level of the Fed’s stimulus and will keep adding further measures if the labour market doesn’t “improve substantially “.
The FOMC also said it would probably hold the federal funds rate near zero “at least through mid-2015.” Since January, the Fed had said the rate was likely to stay low at least through late 2014. The Fed said “a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.”
EURUSD had a brief rally on the initial news before falling back to 1.2875 as traders were quick to take some profits but then reality kicked in and there was no way back for the greenback, with EURUSD since hitting the heady 4 month highs of 1.3054 overnight Asia.
In what’s been a triple whammy week for the Euro we’ve also seen EURGBP climb further to 0.8058 (GBPEUR down to 1.2407) just ahead of technical resistance at 0.8060 and all after a post FOMC dip to 0.7995.
GBPUSD has also taken its cue and had a move above 1.6200 but fallen back below this morning as I type. Overall the Pound is a mixed bag. Unchanged against the Swiss Franc, lower against the strengthening Aussie (1.5280) and back down again versus the Rand after yesterday’s explosion higher.
Today brings more US data which will be closely watched, and of course we can expect the usual frantic Friday behaviour despite traders probably doing their best to get out the door early after what’s been an exceptional week.
The mighty Shrimpers head away from home tomorrow in search of another three points to sustain their current run of success before heading to league leaders Gillingham on Tuesday. Good luck to all your teams out there this week-end in whatever sport.
And finally, I make no apologies for a delayed report this morning but I have been suitably distracted listening to, and watching, the final Chris Moyles show on Radio 1. Love or loathe him, the man and his team have been making innovative and exceptional radio for over eight years and this column salutes you sir!
Have a great week-end everyone.
Interbank Rates at 08:47 BST
Today’s Data: BST
10.00-EU – Eurozone CPI
13.30-US – CPI / Retail Sales
14.14-US – Capacity Utilization / Industrial Production
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Mike ‘Oscar’ Paterson has been in the Forex trenches for nearly three decades working as a senior Spot trader in London at UBS, Chief Dealer FX at the State Bank of Victoria and in charge of Spot CHF at Credit Suisse with a daily turnover in excess of $1.5 billion. Mike now works as an independent consultant providing a fully bespoke service to the corporate and private sectors in physical FX delivery as well as guiding those who wish to improve their currency trading. Mike also presents seminars and workshops and writes for a number of publications.
To contact Mike please call +0044 (0) 1732 700383 or email email@example.com
The views expressed above are those of the author and should not be taken as investment advice. MSP Foreign Exchange Services will have no liability for, or to, any persons executing trades based on the content above.