Welcome!

News Feed Item

FXPRIMUS Market Brief of the Week: Investors Continue Seeking Federal Reserve's (Fed) Monetary Policy to Gauge Direction

SINGAPORE, SINGAPORE -- (Marketwired) -- 01/09/14 -- In FXPRIMUS' Market Brief of The Week for 6 January, the brokerage firm's Senior Economist, Jimmy Zhu, looks at the Fed's current monetary policy and possible effects on the market.

Economic Insights

Fed policy will likely dominate sentiment in upcoming months

The Fed decided to pull back its monthly bonds purchases last month, setting the USD and equities more solid. However, treasuries fell sharply on the rising borrowing cost concern. Of course, easy money isn't over yet as inflation remains a good reason for the Fed to continue its mega stimulus program, pledging to keep interest rates at record lows. I estimate that the following few Federal Open Market Committee (FOMC) meetings will track the possibilities below:


1.  The unemployment rate is still too high, so maintaining a highly
    accommodative monetary policy in the upcoming few months is necessary.
2.  With Fed asset purchases, most voting members believe that benefits
    outweigh the cost of Quantitative Easing (QE), since the plan
    contributes to economic growth and improves outlook.
3.  Fed's QE tapering is not a pre-set course. Janet Yellen also said that
    each of the Fed's monetary policy meetings will continue assessing the
    economic outlook and decide whether QE will continue reducing.
4.  Regarding financial stability, Yellen reiterated her view on asset
    bubbles prevention; the best way to stabilize the financial system is
    through regulatory policy, rather than adjusting the current monetary
    policy.

Overall, there shouldn't a significant monetary policy adjustment in first half of 2014.

However, based on Fundamentals, higher borrowing costs on US sovereign debt and the improving economy will help boost the Dollar this year, especially against the Aussie and Yen. It was well proven in 2013. Policy divergence could be one of the main strategies used by currency traders. In 2014, major central banks are set on diverging paths in terms of monetary policy, and the US economy will support a slightly "tightening" view compared to the rest.

The FOMC will probably continue tapering over its next seven meetings before ending the program in December, according to current estimates. If this is the case, the average tapering amount per meeting should be around USD 10 billion.

Looking at available recent U.S. economic indicators, Manufacturing grew in December at the second-fastest pace in more than two years. Another key report will be released this Friday - the Non-Farm Payroll (NFP), which should stay well above 180K.

Let us assume that US fundamentals are really solid, as I mentioned earlier. The challenge for other central banks is that if long-term borrowing costs do rise in the US, they have to ease monetary policy further, given that there are fragile economies elsewhere. Historically, markets are highly correlated, so if we see US rates rise, it will be hard for European rates to stay where they are. The same goes for Australia, New Zealand or even Japan. This offers investors a clear direction to make the correct decision.

The European Central Bank's (ECB) rate decision and press conference will be this Thursday. I do not think another rate cut will arrive this week. However, if deflationary risks mount significantly, Mario Draghi will need to start looking at other options besides the rate cut since the Fed trims down its assets purchases.


Top news this week
U.S. Non Farm Payrolls in December
I expect figures to come in at 198K.

ECB Rate Decision
I expect figures to come in at 0.25% unchanged.

ABOUT FXPRIMUS

FXPRIMUS offers retail traders a level of trade execution, service quality and fund safety that are normally reserved only for the largest investors. Serving traders in 205 countries across 6 continents FXPRIMUS combines an unmatched level of fund safety with regular independent audits of company financials and Straight Through Processing, top notch execution with tight spreads, prompt and responsive customer support, ISO 27001 certification in Information Security, ISO 9001:2008 certification in Quality Management and an industry-leading trader toolset that includes free access to powerful trader tools. FXPRIMUS truly is The Safest Place To Trade.

Add to Digg Bookmark with del.icio.us Add to Newsvine

Contacts:
FXPRIMUS Support
support@fxprimus.com

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more business becomes digital the more stakeholders are interested in this data including how it relates to business. Some of these people have never used a monitoring tool before. They have a question on their mind like “How is my application doing” but no id...
Join us at Cloud Expo June 6-8 to find out how to securely connect your cloud app to any cloud or on-premises data source – without complex firewall changes. More users are demanding access to on-premises data from their cloud applications. It’s no longer a “nice-to-have” but an important differentiator that drives competitive advantages. It’s the new “must have” in the hybrid era. Users want capabilities that give them a unified view of the data to get closer to customers and grow business. The...
The current age of digital transformation means that IT organizations must adapt their toolset to cover all digital experiences, beyond just the end users’. Today’s businesses can no longer focus solely on the digital interactions they manage with employees or customers; they must now contend with non-traditional factors. Whether it's the power of brand to make or break a company, the need to monitor across all locations 24/7, or the ability to proactively resolve issues, companies must adapt to...
IoT solutions exploit operational data generated by Internet-connected smart “things” for the purpose of gaining operational insight and producing “better outcomes” (for example, create new business models, eliminate unscheduled maintenance, etc.). The explosive proliferation of IoT solutions will result in an exponential growth in the volume of IoT data, precipitating significant Information Governance issues: who owns the IoT data, what are the rights/duties of IoT solutions adopters towards t...
It is ironic, but perhaps not unexpected, that many organizations who want the benefits of using an Agile approach to deliver software use a waterfall approach to adopting Agile practices: they form plans, they set milestones, and they measure progress by how many teams they have engaged. Old habits die hard, but like most waterfall software projects, most waterfall-style Agile adoption efforts fail to produce the results desired. The problem is that to get the results they want, they have to ch...
With the introduction of IoT and Smart Living in every aspect of our lives, one question has become relevant: What are the security implications? To answer this, first we have to look and explore the security models of the technologies that IoT is founded upon. In his session at @ThingsExpo, Nevi Kaja, a Research Engineer at Ford Motor Company, discussed some of the security challenges of the IoT infrastructure and related how these aspects impact Smart Living. The material was delivered interac...
Wooed by the promise of faster innovation, lower TCO, and greater agility, businesses of every shape and size have embraced the cloud at every layer of the IT stack – from apps to file sharing to infrastructure. The typical organization currently uses more than a dozen sanctioned cloud apps and will shift more than half of all workloads to the cloud by 2018. Such cloud investments have delivered measurable benefits. But they’ve also resulted in some unintended side-effects: complexity and risk. ...
The taxi industry never saw Uber coming. Startups are a threat to incumbents like never before, and a major enabler for startups is that they are instantly “cloud ready.” If innovation moves at the pace of IT, then your company is in trouble. Why? Because your data center will not keep up with frenetic pace AWS, Microsoft and Google are rolling out new capabilities. In his session at 20th Cloud Expo, Don Browning, VP of Cloud Architecture at Turner, posited that disruption is inevitable for comp...
In 2014, Amazon announced a new form of compute called Lambda. We didn't know it at the time, but this represented a fundamental shift in what we expect from cloud computing. Now, all of the major cloud computing vendors want to take part in this disruptive technology. In his session at 20th Cloud Expo, Doug Vanderweide, an instructor at Linux Academy, discussed why major players like AWS, Microsoft Azure, IBM Bluemix, and Google Cloud Platform are all trying to sidestep VMs and containers wit...
While DevOps most critically and famously fosters collaboration, communication, and integration through cultural change, culture is more of an output than an input. In order to actively drive cultural evolution, organizations must make substantial organizational and process changes, and adopt new technologies, to encourage a DevOps culture. Moderated by Andi Mann, panelists discussed how to balance these three pillars of DevOps, where to focus attention (and resources), where organizations might...
With major technology companies and startups seriously embracing Cloud strategies, now is the perfect time to attend 21st Cloud Expo October 31 - November 2, 2017, at the Santa Clara Convention Center, CA, and June 12-14, 2018, at the Javits Center in New York City, NY, and learn what is going on, contribute to the discussions, and ensure that your enterprise is on the right path to Digital Transformation.
No hype cycles or predictions of zillions of things here. IoT is big. You get it. You know your business and have great ideas for a business transformation strategy. What comes next? Time to make it happen. In his session at @ThingsExpo, Jay Mason, Associate Partner at M&S Consulting, presented a step-by-step plan to develop your technology implementation strategy. He discussed the evaluation of communication standards and IoT messaging protocols, data analytics considerations, edge-to-cloud tec...
New competitors, disruptive technologies, and growing expectations are pushing every business to both adopt and deliver new digital services. This ‘Digital Transformation’ demands rapid delivery and continuous iteration of new competitive services via multiple channels, which in turn demands new service delivery techniques – including DevOps. In this power panel at @DevOpsSummit 20th Cloud Expo, moderated by DevOps Conference Co-Chair Andi Mann, panelists examined how DevOps helps to meet the de...
When growing capacity and power in the data center, the architectural trade-offs between server scale-up vs. scale-out continue to be debated. Both approaches are valid: scale-out adds multiple, smaller servers running in a distributed computing model, while scale-up adds fewer, more powerful servers that are capable of running larger workloads. It’s worth noting that there are additional, unique advantages that scale-up architectures offer. One big advantage is large memory and compute capacity...
Cloud applications are seeing a deluge of requests to support the exploding advanced analytics market. “Open analytics” is the emerging strategy to deliver that data through an open data access layer, in the cloud, to be directly consumed by external analytics tools and popular programming languages. An increasing number of data engineers and data scientists use a variety of platforms and advanced analytics languages such as SAS, R, Python and Java, as well as frameworks such as Hadoop and Spark...