Archive for January, 2009
FOMC: Preview of policy meeting
Overview : Tonight at 20:15 CET the Federal Open Market Committee (FOMC) is set to announce its policy rate decision. Following this weekend's events the market is discounting a 68% probability of a 25bp cut in the Fed funds rate or alternatively a 34% probability of a 50bp rate cut at tonight's meeting. While we attach a positive probability to a rate cut our base scenario remains that the FOMC will leave the Fed funds rate unchanged at 2%. However, the case for an emergency rate cut could
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USA: FOMC holds rate policy steady at 0 to 0.25%, prepared to buy treasuries if warranted, USD firms
The Fed elected to keep its target range unchanged at 0 to 0.25%. The Fed anticipates that economic conditions will warrant exceptionally low Fed funds rates for some time. The Fed says that the economy has weakened further since they met in December noting declining industrial production, housing starts, employment and businesses cutting back spending. The Fed said global demand has slowed significantly. The Fed expects gradual economic recovery later this year but notes significant downside
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FOMC: Ready to scale up purchases
Overview : The Federal Open Market Committee (FOMC) decided at its policy meeting to keep the fed funds rate unchanged in the 0-0.25% range. Moreover, the committee signalled that the fund rate will remain low for a long time. It was decided not to scale up mortgage bond purchase programs or start buying Treasury securities. Richmond Fed President Lacker dissented, preferring to expand the monetary base by purchasing Treasuries rather than through targeted credit programs. The market was
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It’s 2009. Get Your Trading S*** Together, Man!
A week ago, I wrote a letter to a friend about his trading. I told him it was time to get his s*** together. Dear Horatio: You wrote to me and said: My gains for the month are gone. I need a deeper understanding of the Forex Market. Much deeper. Negative. You do not need a deeper understanding of the forex market. You need a deeper understanding of yourself. And then you need to start doing what you promised me that you would do: you need to close down your accounts with a lot of
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Euro Rallies as ECB Trichet Signals More Cuts Ahead, But Not Until March
After having cut interest rates by 50bp this morning to 2 percent, ECB President Trichet is finally buckling down and signaling that he is ready to cut interest rates again BUT NOT UNTIL March. Despite the weakness in the economy and softer inflation pressures, the hawk in Trichet refuses to die. By saying that the Feb meeting will not be important suggests that pausing is still an option. The next meeting that matters is in March at which the ECB will release new projections. The Feb meeting
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FOMC Preview: Coordinated Rate Cut Needed
The biggest event risk this week is undoubtedly the Federal Reserve’s monetary policy decision on Wednesday. Now more than ever, the Fed’s decision could turnaround the currency and equity markets. Since the last interest rate cut by the central bank on October 8th, the dollar has rallied more than 8 percent and the Dow Jones Industrial Average has fallen by more than 10 percent. The Fed’s half point rate cut at the time was a part of a coordinated effort with central banks from around the
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Poland: NBP delivers 75bp rate cut
The Polish central bank (NBP) today cut its key policy rate by 75bp to 4.25%. The decision to cut by 75bp was slightly more aggressive than the consensus expectation and our expectation of 50bp. However, the market reaction should be rather limited as it clearly has been priced for a more aggressive cut than the consensus expectation.
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US: FOMC - Preview of policy meeting
Overview: On Wednesday night at 20:15 CET the Federal Open Market Committee (FOMC) is set to announce its policy rate decision. In line with market expectations and analyst consensus, we expect the Fed to keep the 0-0.25% range on the Fed funds target in place. Focus will be on the committee‟s stance on quantitative easing. On the back of the recent rise in the yields of some long dated mortgage benchmarks, the risk is that the Fed will scale up on quantitative easing. Such an announcement
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Hungary: central bank hiked the base rate by 300bp to 11.50%
Today, the Central bank hiked the base rate by 300bp to 11.50% The forint has started to strengthen after the announcement.
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Japan: BoJ fears a return to deflation
Overview: Bank of Japan (BoJ) today, as expected, left its leading O/N target rate unchanged at 0.1% in a unanimous board decision. In addition, BoJ revised its GDP forecasts sharply lower for both FY 2008 and FY 2009. Although BoJ still avoids using the D-word, it appears that it is becoming increasingly concerned about the possibility of a return to deflation in Japan. With the O/N target rate close to zero, the O/N target rate is no longer the main monetary instrument. As we stressed in our
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