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QE

Looking for a retest of 4610 rangeI'm certainly not a person to take financial advice from. But today I noticed something in morning futures trading that concerned me. A news release on bio & tech caused about 5 minutes of extreme volatility and a test / rejection of 4712. My thoughts are that with Fed Bond purchases this morning at 10am there might be additional volatility for the indexes and a retest of yesterdays -/+ gamma flip levels. Not Financial Advice. A 007 trading journal.
CME_MINI:ES1!Short
by SPYvsGME
2
SVM after consolidation showing "HEAD & SHOULDERS" - ready for ^Silver and SVM has consolidated to new lows in 2021. Await FED printing program QE to float more QQQ. SVM showing head and shoulders after retracing that should break upward from current position. Silver will need to get back to $25, or $28 range for really good up. Just my opine, trade at your own risk as call for Jan in the money, or buy due to inflation of FED printing program. Hard to have $3.4+T budget without more paper...gold std long gone. @Pokethebear Love to hear from the Metal Bears and Bulls.
AMEX:SVMShort
by Pokethebear
GOLD: the effects of tapering (Bernanke 2013 vs Powell 2021)Hi Guys, to keep it simple... Financial Crisis 2007-2008 and Pandemic led to the implementations of QE programmes in combination with other accomodative monetary policies. Following these events FEAR drove the value of Gold to its highest at $2.000 both in 2011 and in 2020. In both these occasions, after having reached $2000, the precious metal bounced off the support to unfold lower highs to form what may look like descending triangles. In 2013 the support was finally broken when Ben Bernanke announced a "tapering" of some of the Fed's QE policies contingent upon continued positive economic data. Specifically, he said that the Fed could scale back its bond purchases from $85 billion to $65 billion a month during the upcoming FED policy meeting. On Sept.22nd, 2021 Jerome Powell said tapering of bond buying coming "soon". Can you see the similarities? Will Gold react the same way as it did back in 2013? It seems too easy to be true. LOL. Hope the above is of interest but if you have any queries please do not hesitate to ask. Good luck everybody! Cozzamara Disclaimer: Please note that I am not a professional trader and these are my personal ideas only. The information contained in this presentation is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. Cozzamara is not responsible for any liabilities arising from the result of your market involvement or individual trade activities. Trading in foreign exchange (“Forex”) on margins entails high risk and is not suitable for all investors. Past performance is not an indication of future results. In this case, as well, the high degree of leverage can act both against you and for you. Before you decide to invest in foreign exchange, you should carefully assess your investment objectives, experience, financial possibilities and willingness to take risks. There is a possibility that you will lose your initial investment partially or completely. Therefore, you should not invest any funds that you cannot afford to completely lose in a worst-case scenario. You should also be aware of all the risks associated with foreign exchange trading and contact an independent financial advisor in case of doubt.
SAXO:XAUUSD
by cozzamara
THE MECHANISM BEHIND QUANTITATIVE EASING &THE IMPACT OF TAPERINGOver the past few months one of the most popular topics generally has been related to whether the FED will taper its asset purchases. Now that we are almost past the recovery phase and about to enter the economic mid-cycle expansionary phase as inflation is far about target (>4% compared to 2%) and GDP is far above trend (2021 Estimate of ~6-8% vs potential GDP of 1.9%) it is clear that the current accommodative monetary stance may have higher risks than returns in the medium run. This idea will go into detail and I will attempt to answer the question of how does QE and FED balance sheet tapering work and what are the implications for broad assets prices and your investment portfolio? 1. Firstly, what is the mechanism behind QE, tapering, and how does it affect your portfolio? The FED has 3 key methods through which it conducts its monetary policy: 1) Discount Rates 2) Required Reserves 3) Open Market Operations (OMOs). Within OMOs fall any operations that expand, stabilize or unwind assets of the FEDs balance sheet (here too derivative products such as dollar swaps can be included). Moreover, in even broader terms, credit creation can be directed at consumer credit, commercial and industrial business loans and financial products. This is just an attempt to illustrate how it all works. It's arguable that the more important side of QE is the Mortgage-backed securities (your housing mortgages pooled together in one security and sold to investors, the FED etc) purchases, which is more directly aimed at particular market segment. The enormous question is why are FEDs MBS purchases perhaps the most influential OMO tool? The MBS market is fairly complex, but one potential explanation (not mine) is that as the FED is the most secure and largest buyer of MBS, for the rest of the investors the portfolio risks (ex Value-at-Risk) fall substantially for this part of their portfolio allowing them to take a more risk-on approach for other asset classes (equities). Additionally, my guess is given that MBS purchases imply a steadier equity value for US home owners for whom the majority of their equity is tied to the value of their houses, as credit becomes more easily available to new home buyers, existing home buyers can also take on a more risk-on approach to investing into other assets. This is observed from the FEDS MBS balance sheet operations in 2013 and 2018 and 10 year curve which reflects growth, the MBS QE side is most directly related to changes in the 10 year. Higher housing demand can perhaps imply higher growth due to the Real Estate component of GDP (ex China), although the net-benefit is debatable. The relationship between asset purchases, housing prices and rents in the past 10 years has been fairly complex (snipboard.io), since it takes time for the newly created money supply to show in the national Case-Shiller housing prices, causing an instable lead-lag relationship. Moreover, the two tapering Operation twists in 2011 and 2014 (Operation twist is a yield curve control measure, where the FED sells short-term treasuries and buys longer term treasuries, with the aim of flattening the yield curve), caused drops in the 10 year yields, leading to even more elevated stock prices (particularly high duration growth stocks). In essence, the FED over the past decade, has actively attempted to suppress yields whose by-product lead to even more elevated P/E ratios (www.multpl.com). How? All assets are priced based on their cashflow(profit) growth and the riskiness of it. In the component of riskiness, are nominal interest rates, hence if nominal interest rates fall => required return falls => for the same earnings growth you get a higher P/E multiple. Running a simple linear regression on SPX P/E multiples and 10 year FED >10 year asset purchases and MBS for the past 5 years, the beta coefficients of both purchasing programs are 0.385 and 0.4, however only the 10 year asset purchases beta is significant (t-stat of 2.4, obviously not robust, many further iid checks are necessary). This means that if the FED does taper and is not forced to do a third Operation Twist, P/E ratios should remain relatively stable in 2021 (snipboard.io), although this is also assumes no major fiscal changes (capital gains/corporate tax related) and no large demand shocks. 2. Alright, then what gives, based on what outcomes do the FED members vote whether to taper and/or do other monetary policy adjustments? It comes to two simply stated mandates, yet their relationship is quite complex and it is a trade-off between 1) Maximum employment (Unemployment rate below <5% of the long-term rate) and 2) Price stability(inflation within the target range 1-5 to 2.5%). The FED has recently been focused primarily on Maximum employment, however it is clear that there are many structural issues in the labor market that have slowed down its recovery. It is arguable that this has caused even greater pressures on wages. With both wage and commodity input prices rising, business are forced with a choice of whether to pass through costs. If they do, higher prices imply lower sales volumes impacting their market share and if they don't, their profit margins are squeezed. However, neither seems to be happening on a large scale yet as the SPX profit margins are at an all-time high (snipboard.io), although the SPX is heavily tech sector skewed, whose margins are not as affected by commodity prices. Eventually, business will pass through costs, if the company costs are persistent (such as wages), and profit margins will readjust lower. The old inflation paradigm was, shelter CPI growing above the 2% target at 3-3.5%, while the rest of consumer goods and services growing below 2% allowing for the overall core inflation to be within the target range. However, wages are growing above trend, shelter prices are picking is above target, and consumer credit is starting to grow again (snipboard.io). The longer the FED delays cooling down the market, the higher the risks of persistent inflation. The global supply chain bottlenecks are just the icing on the cake. However, if the FED does taper, that will provide quite an immediate slowdown in PMIs. Additionally, if the FED tapers today, that would imply potential dollar shortage accompanied with the current slowdown in China, which can be a serious threat to EM, as it would be harder for companies to satisfy their dollar denominated debt obligations. The dollar rise from rising hawking expectations from the FED, are partially off-set by the quicker hawkish schedules from other central banks, however the dollar should still gain, especially if the slowdown in China persists and other EM countries continue to struggle dealing with Covid. 4. Interestingly, given zero interest rates and vast increase in money supply, how has inflation been very muted post 2009 until the pandemic occurred? Having zero interest rates, accompanied by expansion in financial asset credit, implies that cash needs of households and businesses are satisfied. Any major credit risks are further alleviated as the excess liquidity decreases roll-over risks for companies, allowing them to borrow at increasingly low debt costs. This paradigm reinforces competition, which reinforces innovation, which has been a greater drag on inflation than excess liquidity has been an inflation push. This allowed for muted inflation in goods and services, even further placing pressure on the yield curve level, driving asset prices even higher. The owners of financial assets have been the greatest beneficiaries due to the high real yields. This has also meant a higher income inequality, which a real systematic risk on a going forward basis. The difference relative to post 2008 and the post-pandemic policies, which also included expansion in credit to households (government checks) and credit to small business on a far greater scale(Bush admin only gave 300$), which were principally financed by the Fed as the major buyer of Treasuries (snipboard.io). The Fed now owns >20% of the entire treasury supply, however still less relatively to most other central banks (snipboard.io). Hence, the major problem that the FED is in, is how to tackle income inequality, as the current fiscal policies are directly related to inflationary pressures (government gives people cash checks, people spend it on consumer goods, prices rise). Democrats policies with are aimed at dealing with inequality, may have major inflationary expectations, which if they get out of control, may force the Feds hand, in which case the fed would have to raise interest rates or perform a major balance sheet unwinding, causing a major short-term downturn and possibly a recession. For now this is the unlikely scenario, and chances are that the stagflationary scenario in the medium term is more likely, however this issue will be reserved for some other post. 5. What returns to expect for the rest of 2021 and going forward into 2022? To summarize this idea, the is a chart showing the SPX/FED assets ratio, summarizes the reliance of equity prices to QE where the SPX would be nearly flat if it weren't for QE, as the rises in QE purchases are almost tad-for-tad followed by rising equity prices. This is why before making any investments, the most fundamental consideration to make should include how will the FED guide asset prices forward. QE used to be aimed at elevating financial stresses as central banks bought toxic assets so that banks capital ratios improved, however because of lack of flexibility on interest rates as they were nearly pegged to the zero-lower bound post 2008 and the far greater sensibility to interest rate changes as leverage rose (both private and public), QE or asset purchasing programs became the primary monetary policy tool used by developed regions central banks. It's clear that QE can be considered as an asset price guiding program. The current consensus at the FED is that they will adjust asset purchases (taper) downwards by year end which should last until the middle of 2022, when they can readjust policy and start expanding asset purchases again. Currently I would not rely on any guidance by the FED and rate hike dot plot expectations are pointless given the current volatile environment. Overall, if the FED decides to taper today, or in the upcoming months expect a choppy first half of 2022, followed by a drift higher in the second half with high conditionality on inflation being muted and lower probability of rate hikes. One thing is certain, which is do not expect the same 2020, 2021 returns in 2022. If the FED does not taper today expect a short-lived rally, and another drop going into the year end, otherwise if the FED does taper today last weeks dip should extend which should be followed by a potential year end rally. On the fiscal side risks remain high of policy adjustments that may target investment income which may cause the reward from investing to drop while risks to rise, in addition to other highly inflationary fiscal policies such as the current infrastructure plan. If you are highly risk-averse and are looking to buy the dip, I would recommend caution, and perhaps wait (if the FED does taper) until May to invest and do consider whether 6%-10% potential returns in 2022 and the potential forward market risks are aligned with your risk profile. There are many other factors to consider such as negative real yields and the factors that can cause a stagflationary environment going forward which I will analyze in some other ideas! Thanks for taking the time to read this idea! Any comments, questions and discussions are welcome! -Step_ahead_ofthemarket ________________________________________________________________________________________ >>I do not share my ideas for the likes or the views. This channel is only dedicated to well-informed research and other noteworthy and interesting market stories.>> However, if you'd like to support me and get informed in the greatest of details, every thumbs up and follow is greatly appreciated! Disclosure: This is just an opinion, you decide what to do with your own money. For any further references or use of my content- contact me through any of my social media channels.
Editors' picks
SP:SPX
by step_ahead_ofthemarket
40
It’s Recalibration, Not Tapering (10 September 2021)The ECB’s decision. The European Central Bank (ECB) held its interest rates unchanged during their monetary policy meeting yesterday. Main Refinancing Operations Rate: 0.00% Marginal Lending Facility Rate: 0.25% Deposit Facility Rate: -0.50% The size of its quantitative easing (QE) programmes remains unchanged as well. Asset Purchase Programme (APP): €20 billion per month Pandemic Emergency Purchase Programme (PEPP): €1,850 billion in total On top of that, the central bank has opted for a reduction of pace in its assets purchase under the PEPP but did not provide more details on the amount. At the moment, €80 billion worth of assets are being purchased on a monthly basis. It’s recalibration, not tapering. Just when the market is trying to figure out from the monetary policy statement if the ECB has just carried out a QE tapering, the central bank’s President Christine Lagarde elucidated that the reduction of the pace is not a tapering, but a recalibration. The ECB’s decision “is to calibrate the pace of our purchases in order to deliver on our goal of favourable financing conditions”. President Lagarde’s comment left the market wondering how significant is such an action carried out by the central bank going to have on QE if it is not considered as tapering. As a result, the euro was moving in an unclear direction. Positive inflation projections. Although the ECB’s action is likely going to spark some discussions over its ambiguity, one thing we know for sure is that the central bank is feeling confident in the recent rise in inflation in the eurozone. As released in the quarterly projection materials, overall inflation forecasts have been revised upwards. Inflation Projections: 2021: revised upwards from previous 1.9% to 2.2% 2022: revised upwards from previous 1.5% to 1.7% 2023: revised upwards from previous 1.4% to 1.5%
by GH_Lee
Dovish Tapering Locks In QE (08 September 2021)The dovish tapering decision. During its monetary policy decision yesterday, the Reserve Bank of Australia (RBA) kept its cash rate unchanged at 0.10%. As promised, the central bank proceeded with its quantitative easing (QE) tapering plan announced back in the July’s meeting. What came as a surprise is the duration of the new round of QE. Previously, the RBA opted for a two-month QE duration. But during the announcement yesterday, the central bank decided to extend the duration by five months instead. Thus, the tapered A$4 billion QE will run from September until at least February 2022. As a result, the Australian dollar strengthened for a brief period of time before weakening across the board, reflecting the dovishness as a result of the extension of the QE duration. Delta variant still a concern to the RBA. Despite RBA Governor Lowe saying previously that fiscal policy will prove to be more effective than monetary policy in providing aid at the moment, this does not deter the central bank from making a more cautious decision. As explained in the rate statement, the RBA’s decision to extend the QE duration “reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak”. Rate hike remains out of sight. As with the previous meetings, the RBA continues to reiterate that its cash rate will not be increased until inflation falls within the 2-3% target range and this condition will not be met before 2024 based on their current projection.
by GH_Lee
To the moon: No more bears!Tech has gone into a melt up! The word on the block is that there are no more bears. Well, loads of people are long in the market. Would you go long now? When I look back to March 2020, the dip south seems soooo insignificant. We know that markets correct but we don't know when major corrections are going to happen. What's driving the market? Some say it's about looking beyond the pandemic. I think that's just neat terminology to cover greed. We're now into an era where GDP doesn't matter. PE ratios don't matter. Political and economic data don't matter - most of them pumped up anyway. Delta and epsilon to come in the pandemic - doesn't matter. Crises in demand and supply don't matter. China doesn't matter after all the hullaballoo about the China Deal - few people remember much about it. US Dollar crash - that's great news for the markets. No really - markets love weak currencies. Inflation - what's that? The FED said it's transitory - but nobody except the FED knows what that means. Housing market totally overheated with minor cooling in the last two weeks. Transportation index in trouble. Not a problem. Global warming - fires in 20 countries. Fires in Siberia producing more CO2 than all the other fires combined. Melting of Greenland: the total aerial extent of surface melting (total melt-day extent) for 2021 through August 16 is 21.3 million square kilometers (8.2 million square miles), tied for the fourteenth highest total to date, and well above the 1981 to 2010 average of 18.6 million square kilometers (7.2 million square miles). Who cares - climate problems are well out of sight - unless the Gulf Stream shuts down 'unpredictably'. Debt - who cares? There is loads of almost free money around from Uncle Sam - which really comes from the FED passing tons of money. Live fast - get rich fast is the name of the game! Money out of thin air? Yep - more of that to come. Trillions of it. Money for nothing and ..... for free! LOL. So the bears must be dead! If you think differently have your say. Disclaimer: This is not advice or encouragement to trade securities or any asset class. This is not investment advice. Chart positions shown are not suggestions intended to assure you of an advantage. No predictions and no guarantees are supplied or implied. The author trades mostly trend following set ups which has a low win rate of approximately 40%. Heavy losses can be expected if trading live accounts or investing in any asset class. Any previous advantageous performance shown in other scenarios, is not indicative of future performance. If you make decisions based on opinion expressed here or on my profile and you lose your money, kindly sue yourself.
U
by Captain_Walker
Powell's taper comments coming-up: Potential scalp opportunitiesI have set-out my logic in prior posts of how I am exiting the SP500 market from prior longs bought more than 18 months ago - by selling into rallies. If an infrastructure deal goes ahead and debt ceiling issues are dealt to successfully, I will reconsider my current stance. However, I am happy to scalp particularly from needless / senseless market over-reactions for short term scalp trading opportunities. We may see an opportunity coming up with Powell and the Jackson Hole meeting coming up. My rationale set-out below: - tapering is simply a reduction in the Fed's open market operations (OMO) whereby treasuries are purchased from dealers (secondary market) with the result being that cash from trader's is deposited into the Banking system. This cash is also known as reserves ( Refer blue Histogram ) - The effect of this QE style OMO is to strip credit interest out of the non-government sector that would have otherwise been paid to holders of treasuries as one form of money (treasurites) is replaced with another form (Bank cash / reserves). - the banking system is 'pull system' , not a 'push system'. Banks need capital to make loans; not deposits as the Fed, like all Reserve Banks, they act as lender of last resort. Stuffing the banking system full of cash does not benefit Banks, rather it makes regulatory capital management harder for Banks and produces scarcity of interest bearing securities, with downward pressure on rates. - to offset some of this effect, reverse repos have been employed by the Fed as a 'temporary' measure - but is its like a senseless merry-go-round. Why am I saying all of this? - where you have record high fiscal growth supporting a market (risks looming in the background - debt ceiling), and potentially needless market panic regarding the word 'taper', which is actually positive not negative for the market, then that's a great short term buy opportunity to scalp back to the mean. What level will I buy at: I would like to buy around the cost basis of swing traders which is marked on the chart and which represents around 20% market capitalization. I will be checking out my Market Risk indicator which looks at a range of factors including futures spreads for a potential long scalp trade. Instead, call writing maybe your go-to strategy here instead but there's not much Vol to sell (yet!) #MMT
AMEX:SPY
by Adam-Cox
SPX: The Jerome & Powell 500 Channel As the markets pullback this week, keep in mind we're still in what I call the J&P 500 Channel. The chart is the daily SPX adjusted for Inflation. The bottom channel is a 10 year regression trend channel that has contained the SPX until the march 2020 crash. The upward trending channel is what I call the Jerome & Powell 500 Channel which is a modified schiff pitchfork that represents the QE / Stimulus the Fed has been pumping into the economy since March. If the key level (median line in red) holds over the next few days I plan to buy the dip. If we close below the key level before tapering and the decline of stimulus (rising interest rates, end of moratorium, end of asset purchases) I would worry about a full on correction.
SP:SPX
by SPYvsGME
2
QE Tapering Plan Will Go On (06 August 2021)Three days ago, the Reserve Bank of Australia (RBA) delivered a little surprise when it decided to stick with its quantitative easing (QE) plan announced back in July despite the recent spike in COVID cases in Australia. (Refer to my post "RBA Sticks With QE Tapering Plan (04 August 2021)" on RBA monetary policy) Details on why the central bank decides to proceed with its decision on QE tapering were provided during Governor Lowe testimony earlier today. Lowe’s Testimony During his testimony before the House of Representatives Standing Committee on Economics, Governor Lowe said that the RBA has considered holding back its plan for QE tapering during the monetary policy meeting. However, the central bank’s positive projections on the economic growth for 2022 permitted the plan to continue. Lowe explained that “any additional bond purchases would have their maximum effect at that time and only a very small effect right now when the extra support is needed most.” Furthermore, he mentioned the RBA felt that fiscal policy would be more appropriate than monetary policy in terms of providing aid at the moment. Nonetheless, the flexible approach of its QE programme allows the central bank to make adjustments to the rate of bond purchases in response to any unexpected turn of events. On the subject of the RBA cash rate, Lowe highlighted that the central bank will not be increasing cash rate until inflation is sustainably in the 2-3% range. He emphasised that the RBA needs to be confident that inflation will remain within the targeted range before any rate hike is considered. Finally, Lowe said that the condition for a rate hike “is not expected to be met before 2024”. RBA economic projections. For year 2021, Australian GDP: 4.00 (4.75) CPI Inflation: 2.50 (1.75) Unemployment Rate: 5.00 (5.00) For year 2022, Australian GDP: 4.25 (3.50) CPI Inflation: 1.75 (1.50) Unemployment Rate: 4.25 (4.50) For year 2023, Australian GDP: 2.50 (N/A) CPI Inflation: 2.25 (N/A) Unemployment Rate: 4.00 (N/A) *Figures shown in parentheses refers to projections from May 2021
by GH_Lee
No Signs Of QE Tapering From The BoE Yet (06 August 2021)The BoE’s decision. As widely expected, the Bank of England (BoE) carried out no change to its monetary policy during its meeting yesterday. Interest rate remains at 0.10% with all eight voting committee members voting for no change. Quantitative easing (QE) remains at £895 billion in total. Michael Saunders, one of the hawks of BoE, voted for a reduction in government bonds purchase by £45 billion. Overall positive outlook of the UK economy in the near future. In the quarterly release of the BoE’s monetary policy report, the central bank said that the “impact of COVID on the UK economy fades further over time” although the Delta variant of the virus continues to spread in the UK. The confidence on the economic recovery led to the central bank’s positive revision of its economic projections. Economic Projections: For year 2021, UK GDP: 7.25 (7.25) CPI Inflation: 4.00 (2.50) Unemployment Rate: 4.75 (5.00) For year 2022, UK GDP: 6.00 (5.75) CPI Inflation: 4.00 (2.50) Unemployment Rate: 4.75 (5.00) For year 2023, UK GDP: 1.50 (1.25) CPI Inflation: 2.00 (2.00) Unemployment Rate: 4.25 (4.25) *Figures shown in parentheses refers to projections from May 2021 The BoE expects the UK economy to return to pre-pandemic level during the fourth quarter of 2021. As with the other major central banks, the BoE also felt that the recent rise in inflation is due to transitory factors. With the ceasing of the UK furlough scheme at the end of September, BoE Governor Andrew Bailey highlighted that unemployment was “no longer expected to rise”. He also mentioned that the challenge for the economy now is whether employers can fill up the job vacancies. On the matter of QE. Little was mentioned on QE during this meeting. The BoE said towards the end of its rate statement that “should the economy evolve broadly in line with the central projections in the August Monetary Policy Report, some modest tightening of monetary policy over the forecast period is likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term”. The committee members also intend to start unloading the bond purchased by the central bank when interest rate has risen to 0.5% and will consider to do so actively when interest rate is at least 1%. According to the BoE, interest rate is projected to be at 0.5% by the third quarter of 2024. Hence, it is likely that the central bank will be holding on to its purchases at least in the near future. Interest Rate Projection: 2022 Q3: 0.2% 2023 Q3: 0.4% 2024 Q3: 0.5%
by GH_Lee
Fed QE Tapering Talks Reaching A Crescendo (05 August 2021)Just a couple of days before the release of the long-awaited U.S. nonfarm jobs report, several Federal Reserve committee members expressed their hawkish views on an QE tapering. Fed Vice Chairman sees QE tapering to start this year. During his speech at the Peterson Institute for International Economics yesterday, Fed Vice Chairman Richard Clarida said that together with the other committee members, they expect the U.S. economy to continue recovering towards the central bank’s “substantial further progress” standard although this was not met in July. Also, Clarida highlighted that if his “baseline outlook does materialize”, then he expects the announcement for quantitative easing (QE) tapering to be made later this year. With the progress made in recent months, he believes the Fed is ready for a first round of tapering by year-end. In regard to interest rate, Clarida explained that the three conditions required before the Fed considers a rate hike are: Labor market conditions reaching levels consistent with the Fed’s assessments of maximum employment Annual inflation rising to 2% Annual inflation is on track to moderately exceed 2% for some time And in a scenario whereby the Fed’s economic projections realized over the forecast horizon, Clarida believes that the three conditions will be met by the end of 2022, thus anticipating a rate hike in 2023. Other committee members in favor of carrying out QE tapering soon. Fed committee member Robert Kaplan said in an interview yesterday that the Fed should start tapering QE soon and gradually as this will give the central bank more flexibility in the future in terms of interest rate adjustments. He also highlighted that continued progress in the job market for July and August should warrant an early tapering of QE. Another Fed committee member James Bullard also supported the idea of an early tapering of QE during an interview with the following reasons: Economic growth in 2021 will likely exceed the central bank’s projection of 4% Unemployment rate has declined much faster than projected Annual inflation for 2021 will likely surpass the projected 1.8% Hence, Bullard believes it will not be an issue meeting the criteria to get QE tapering started.
TVC:DXY
by GH_Lee
1
RBA Sticks With QE Tapering Plan (04 August 2021)The RBA’s decision. During their monetary policy meeting yesterday, the Reserve Bank of Australia (RBA) kept its monetary policy unchanged, holding interest rate at 0.10% and quantitative easing (QE) at a rate of A$5 billion per week. A little surprise. With the recent spike in COVID cases in Australia due to the highly contagious Delta variant, the market was anticipating the RBA to announce the holding back of their QE tapering plan that was made during the previous meeting. However, the central bank stuck to its tapering plan of A$4 billion per week that will run from early September to at least mid-November. RBA downplayed impact of virus outbreaks on economic recovery. Although the RBA decided to stick with its QE tapering plan, it did acknowledge that the recent virus outbreaks are “interrupting the recovery and GDP is expected to decline in the September quarter”. Nonetheless, the central bank is confident that the Australian economy will rebound quickly after getting hit by the outbreaks as justified by previous occurrences. Impact on the Australian dollar. The Australian dollar strengthened as a result of the RBA sticking with their QE tapering plan.
by GH_Lee
The Stock Market Not a Reflection of The EconomyWe are living through the greatest economic expansion in American history. It has become very clear to me that the stock market is no longer a measurement nor reflection of the health of the "real economy" where average everyday people make their income. If it was then the federal minimum wage should be over $30 an hour compared to economic gains our economy has made in the past 30 years. The full-time and part-time employees, freelance and gig economy workers, and your average mom & pop small business owners will continually become displaced and outsourced as automation technology grows and the elite multi-national capitalist dramatically cut their labor cost through automation this decade & beyond. We've hit the top 4.236 of this Fibonacci cycle I have going from the high of December 2007 to a low on November 2008. 13 years and growing of financial prosperity on paper but not so much in reality. The gap between the rich and the poor have never been more grotesque in the history of capitalism. Our government is in the practice of creating infinite amounts of money that some how never gets to the people that actually are in desperate need of financial resources. That seems like a recipe for disaster and social unrest to me. Don't even get me started in the tsunami of inflation that will be coming. If we drop coming back down to 1.618 may be a decent support area for the market (we dropped to the 1.618 during COVID-19 Quarantine). That would be a 56% retrace from these current levels. Can we actually keep the economy growing from these levels once the infinite money creating stops? Or will it ever even stop at this point?
NASDAQ:NDAQ
by peacefuljustin
2
Will a Bank of Canada taper lift CAD?The Canadian dollar continues to drift this week. In the Tuesday session, USD/CAD is trading at 1.2532, down 0.02% on the day. All eyes will be on the Bank of Canada policy meeting on Wednesday (14:00 GMT). The bank is expected to maintain interest rates at 0.25%, where they have been pegged since last March, at the start of the Covid-19 pandemic. Any drama will revolve around the bank's QE programme, with the BoC widely expected to trim weekly government bond purchases from CAD 4 billion to 3 billion. A trimming of QE would be in response to the economic recovery, which has been faster than anticipated. Some 90% of jobs lost during Covid have been recovered and GDP is expected to climb above pre-pandemic levels in the second quarter. With the economy clearly moving in the right direction, the cautious BoC will likely respond with a tapering QE, while maintaining interest rates and its accommodative monetary policy. Although a tapering move is expected, the Canadian dollar could gain ground on Wednesday due to the sheer significance of such a move - it would mark the first tightening in policy by any major central bank since the Covid pandemic. We could also see the Canadian dollar react to the tone of the rate statement. A "less dovish" tone than expected from the bank could improve sentiment towards the Canadian dollar and send the currency to higher ground. Canada will also release inflation data on Wednesday (12:30 GMT), although these numbers are likely to be overshadowed by the BoC rate decision. Headline inflation is expected to tick higher to 0.6%, up from 0.5%, while Core CPI is expected to fall to 0.0%, down from 0.3%. There is support at 1.2446. This is followed by support at 1.2386. On the upside, we have resistance levels at 1.2598 and 1.2690
by OANDA
USD at 78-84 cents by August 2021 ?!Bear trap at 93 cents is almost confirmed and if we head down, look back longer period charts to get guidance on there the key long term support is. I would not short the USD but it's hard to imagine the world is going to flock to the overvalued USD since endless debasement is not endless. Yes, it's endless as the ravine is endless.... The only thing that's holding on the USD at about 90 cents is it's the safer of the FIAT currencies. Or it is? Comment, like, dislike. Everything is good in using the truth as guidance.
INDEX:DXYShort
by UnknownUnicorn2413721