« The Week Ahead! | Home | Dis-Interested Economies! »
Fed Day Fun!
By Mike Conlon | March 16, 2010
Today is the Federal Open Market Committee (FOMC) interest rate announcement and policy meeting that will set the tone for rate policy going forward. While virtually no one expects a rate hike at today’s meeting, once again the market will be listening for changes in the language that may foreshadow what the Fed intends to do. It’s a fine line and careful balancing game that the Fed must play in order to keep world markets stable. Frankly, I’m not expecting much.
On the other side of the pond, the Euro zone meeting of Finance Ministers produced a framework for how to bailout Greece should the situation become dire. This comes after this weekend’s insistence that no such action would take place. The Euro is higher on the news, marking today as mild risk-taking going into the FOMC meeting at 2:15 EST today.
In other currencies:
Aussie (AUD): The Aussie is slightly lower this morning, trying to win the tug of war between risk appetite and the news out of the RBA’s policy meeting that signaled that Australia may be finished with short-term rate hikes as their measures have been deemed “appropriate”. The Aussie is down across the board.
Kiwi (NZD): With the Aussie lower this morning, traders are turning to the Kiwi for both Pacific and higher interest rate exposure.
Loonie (CAD): The Loonie is higher this morning with oil trading around 80, and mild risk appetite as a result of the news out of the Euro zone. Additionally, Canadian Finance Minister Flaherty said in the recent speech that the Loonie would still allow Canada to be competitive if it reached parity with the US dollar. He also said that Canada would continue to try to stimulate the economy, giving slight pause to traders who see a rate hike as imminent.
Euro (EUR): In addition to the news about Greece, Euro zone Minister continued to re-iterate that Greece will not default and that the Euro is not in danger of failing. Also, Euro zone CPI figures came in as expected, showing neither signs of inflation nor deflation. And lastly, German Investor Confidence declined for the sixth month in a row, though not as bad as expected. All of this adds up to a higher Euro this morning, which is above 1.37 vs. USD.
Pound (GBP): The Pound is higher this morning as DCLG reported that UK home prices were up 6.2%, vs. and expectation of 3.5%. While the BOE has been attempting to maintain a dovish stance on rates, the economy may be further along than anticipated showing signs recovery may be happening. The Pound had been punished as of late so any decent news may help the Pound stay above 1.50 vs. USD.
Dollar (USD): The dollar is lower this morning in advance of the FOMC meeting. The Fed has some cover as they will be announcing the decision on rates prior to the market getting CPI and PPI data. So this could be interesting on Wed. and Thur. when that data is released. This morning, US housing starts came in worse than expected, giving further support for the Fed’s ZIRP policy.
Yen (JPY): Tomorrow, the Bank of Japan will be coming out with its interest rate decision and the market is expected further easing of monetary policy. It is no secret that deflation is the major problem in Japan so anything the BOJ can do to support exports and discourage deflation will be considered.
Yesterday I coined this week as “perception vs. reality” week in what is looking more and more like a game of show and tell. If the market can gain confidence that the Euro zone situation is stable, then I expect to see risk appetite return to the market. Any change in the language at today’s FOMC could encourage a flight to safety so trade carefully in advance of the meeting.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, AUD, Aussie, Australia, bank, BOE, cad, canada, course, currenc, currencies, currency, currency market, currency trading, data, decision, dollar, dow, economy, EUR, Euro, fed, free, fx, fxedu, gbp, home, Il, interest, interest rate, invest, investor, Japan, jpy, Kiwi, live, loonie, lower, market, meeting, Mike Conlon, news, nzd, oil, pound, practice, practice account, rate decision, release, short, ssi, time, trade, trader, USD, Yen
Topics: What To Look At In The Market | No Comments »