Wednesday, March 16: Five Things the markets speak of
The dollar, financial volatility and the data of the United States continues to lead the monetary policy of the Fed, and with that, some investors believe the Fed will raise rates at the end of two-day Federal Open Market Committee (FOMC) the meeting today.
Nevertheless, a series of robust US economic data has the possibility of higher borrowing costs later this year on the table. After U.S. CPI and housing this morning, begins the probability of a rate rise in June jumped to 54%, and the chances of a December are now + 81%. It was only last month that dealers fixed income saw the possibility of a rate hike or at zero.
The Fed would never admit defeat on rate expectations. "Point" Today plots are a representation of where the Americans believe policymakers U.S rates should be, and not where they 'will' be.
Some Fed "not" do something today be considered a form of tightening, in particular with the ECB goes deeper into NIRP. The press conference of President Yellen at 2:30 p.m. ET will be well examined.
1. Gold trimmed positions before the Fed decision
The metal "yellow" tends to struggle to compete with the yield-bearing investments when rates interest increase. At present, the downside for precious metals varies with the tone and the result of the Fed later today.
Gold prices rose more than 17% this year, driven by lower expectations of growth rates, negative interest rates in Europe and Japan and investors concerns about the pace of global growth.
2. Backup Returns before US FOMC
The US briefly traded 2 + 1% for the first time in two months yesterday, while pins 10 of the handle psychological astride + 2%. Higher yields in the past month reflects renewed investor expectation that standardization plan of the Fed's rate remains "on track" for 2016.
However, it is interesting to note that yields 10 years traded around 2.3% after the Fed raised rates in December. Many rate had planned to head to + 3%, however, NIRP by the ECB and the BoJ were able to keep a lid on yields U.S. currently.
3. UK economy faces a "risk cocktail"
UK Treasury chief George Osborne announced growth forecasts for the UK deteriorated amid a darkening global outlook, but said it remains on track to close the budget deficit of the nation. It forecasts growth of 2% this year, against a previous forecast of 2.4%.
"Financial markets are turbulent. Productivity growth in the West is too weak. And the prospects for the global economy is weak. It makes for a dangerous cocktail of risk," he said .
Sterling came under pressure and fell to its lowest level in two weeks downright £ 1.4058. The chancellor also warned that the UK would face a "prolonged period of uncertainty" if it voted to leave the European Union. The referendum will be held June 23
4. Not all central banks are losing money-defend the currency
Nationalbank Denmark's efforts to defend the EUR / DKK peg in 2015, he earned a profit a little more + 2b crowns (+ $ 297m).
the central bank has deployed a range of radical policies to maintain stable DKK amid the market turmoil in Q1 2015. Their goal is to keep EUR / DKK within + 2.25% above or below € 7.46038 to maintain low and stable inflation.
instead of abandoning the peg, as many investors had they planned to do like the SNB Nationalbank started selling large amounts of its own currency to weaken.
With their strong position, the central bank finally prevailed and pressured speculators to back off. When the crown began to weaken naturally, the central bank began to buy while locking a profit of changes.
Danish politicians have also started charging commercial banks to hold their reserves in order to lower interest rates in the economy and to keep crowns even less attractive.
5. Tobin tax on its way?
The news from China that the authorities consider a Tobin tax on currency transactions continues to make progress on the financial markets. The ability to slap a tax on currency transactions to curb speculation against the Yuan began a heated debate among analysts. The very introduction of the tax could easily undermine China's attempts to get the Yuan fully accepted in the financial markets. Despite the tax providing some short term stability to limit capital outflows, it will likely cripple the aspirations of the Yuan Internationalization and status of CSDs.
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