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August 26nd- Comments and forex-analytics from FBS

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August 26nd- Comments and forex-analytics from FBS

Postby vanvirtue » Fri Aug 26, 2011 1:13 pm

Martin Weale on the prospects of further QE in Britain

Martin Weale, the Bank of England’s Monetary Policy Committee member, doesn’t think that it’s necessary to expand the central bank’s emergency 200 billion pound ($326 billion) bond-purchase program now.

However, the official says that his opinion may change if UK economy significantly weakened and inflation falls below the 2% target level. According to Weale, more QE will be necessary if the nation’s banks become more reluctant to lend, though he doesn’t believe such outcome is very likely.
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Re: August 26nd- Comments and forex-analytics from FBS

Postby vanvirtue » Fri Aug 26, 2011 1:19 pm

Jyske Bank: EUR/USD will break the «wedge»

Currency strategists at Jyske Bank note that from the beginning of the week EUR/USD remained in range between $1.4350 and $1.5000 ahead of Ben Bernanke’s Jackson Hole speech. However, the latest trend on yield spreads, equities and commodities shows that the pair has strong downward potential.

That’s why the specialists recommend selling the single currency stopping above $1.4580 and targeting $1.3855. In their view, euro is trading within the “symmetrical wedge” and will break this formation this week. The bank forecasts that if the Fed’s Chairman announces QE3, EUR/USD will break the model to the upside; otherwise there will be a downside breach.

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Re: August 26nd- Comments and forex-analytics from FBS

Postby vanvirtue » Fri Aug 26, 2011 1:22 pm

Commerzbank: EUR/USD prospects after Bernanke

Analysts at Commerzbank note that investors are very nervous.

If the comments of the Fed’s Chairman sound uncertain, the pair EUR/USD will get under pressure.

However, the specialists believe that as Bernanke used weak economy to justify the previous QE steps, there’s little chance that he admit that the strategy of monetary stimulus was wrong.

So, it may happen that Bernanke’s views on economy aren’t as pessimistic as many are thinking. In such case the markets will likely calm down and EUR/USD will get some support.

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Re: August 26nd- Comments and forex-analytics from FBS

Postby vanvirtue » Fri Aug 26, 2011 1:28 pm

The background of Bernanke’s speech

All eyes today are on Ben Bernanke’s speech that will take place at 6:00 pm (GMT+4). The market is speculating whether the Federal Reserve’s Chairman signals the third round of quantitative easing or not.

Professor Lew Spellman, from the McCombs School of Business at the University of Texas at Austin takes a glance back examining how the Fed’s monetary policy has been changing since 2008. Spellman points out that the Federal Reserve’s approaches towards QE1 and QE2 were quite different: QE1 was a defensive step aimed to contain GDP collapse, while QE2, on the contrary, was an offensive measure.

It’s difficult to assess the results of QE2 and definitely say whether this program helped the recovery or not. The clear thing is, however, that the inflation expectations have increased – the main argument of those who don’t expect QE3.

At the same time, it’s also important to realize what the general approach of Bernanke is – as his colleagues say, the central banker is a man of action: he would rather err doing too much, rather than too little, when dealing with the consequences of financial crisis. Bernanke is also known for criticizing Japanese monetary authorities in 1999: in his view, the Bank of Japan didn’t do enough to fight deflation and encourage economic growth, while it should have kept interest rates low until inflation picked up and buy government bonds.
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