The Federal Reserve bank did what we were expecting, another 10 billion taper and reducing the total quantitative easing to $65 billion. The European markets, which was getting a breather from the sell off, now have more reasons to continue this sell off. I mean there is nothing positive in the markets today that you would think which could push the markets higher, especially after the Chinese manufacturing PMI number, which once again frustrated the market participants. With China slowing down, emerging markets on the verge of a currency crisis, the US economic data also not thriving, and the Fed is taking the markets heroin addiction away, leaves very few reasons to be optimistic today.
The irony is this that the decision by the Federal Reserve committee was also unanimous and the committee was not concerned about the deflationary pressure either. However, one positive thing for the markets was that the ten-year US bond yield, interestingly, moved lower, on the back of this tapering, as compared to their previous decision when it actually soared. You can blame this to emerging market turmoil, and investors want to hedge themselves with the safest possible derivative and hence, they land on the US ten-year bond yield.
The economic docket is full today for the US. We have the US GDP data at 13:30 GMT and the expectations are that the Q4 reading may actually decline to 3.2% from previous reading of 4.1%, as the durable orders released earlier are vouching for this expectation. Weekly jobless claims data is due at the same time and the forecast is for 330K.
Back in Europe, the major talk will be around the UK’s economy. We have the lending figures due and the forecast is for 1.9 billion. If the final reading is significantly higher than the expectations, then we have there is fear that the recovery in the UK is uneven because the average income is less than the rate of the inflation. German unemployment numbers are also due at 08:55 GMT and the forecast is for -5K.
Disclosure & Disclaimer:
The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader. by Naeem Aslam