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Fed may announce the next QE3 reduction - 18.6.2014

Global stock indices have risen on Tuesday despite the U. S. weak economic data. The inflation index increased in May by 0.4%: that was the biggest increase since August 2011 and twice exceeded the forecasts. In annual terms it has reached the highest value of 2.1% since October 2012. This is slightly more then the Fed target of 2%.

For the first time during four months the value of Building Permits and New Houses fell in May by 6.4% and 6.5% correspondingly in relation to April. Some hedge fond managers commented this atypical phenomenon. They reported about the sale of American state bonds and the purchase of shares in terms of the increasing inflation. We should note that the price of 10-year bonds has lost 2% while the annual yield has grown up from 2.44% to 2.65%. Meanwhile Dow Jones Industrial has increased by 1%. It is hard to tell how long this trend will last. Yesterday the volume of shares traded on the U.S. stock exchanges was higher by 4.4% than the month average and amounted to 5.61 billion units.

Today at 18:00 CET the U.S. Fed may announce that the next reduction of the QE program by $10 billion to $35 billion per month. Besides, the Chair of the Fed Janet Yellen will give a speech and the economic outlook will be presented. At 17-45 CET the former Fed Chairman Ben Bernanke will deliver a speech. Note that the majority of market participants expect the redemption of government bonds to be completed by October and to increase the U.S. interest rates in the second half of 2015.

As anticipated, the ZEW investor confidence index in Germany for June resulted to be positive. This contributed to the growth of the European stock indices. Construction data for April is released today at 9:00 a.m. CET in the Eurozone. However, we believe that today, as a result, European stock quotes are moving in line with the global trends, according to the U.S. Fed information.

Japan Index Nikkei

Today the Nikkei has grown within its neutral trend the second consecutive day. The data on Japan foreign trade for May are generally decent. Exports fell for the first time in 15 months by 2.8%, but imports had a bigger decrease: by 3.6%. As a result, the trade deficit reduction has exceeded the forecasts. Besides, supermarket sales in May also showed a positive trend. We recall that early the next morning the weekly Ministry of Finance data on investment in Japan is coming out, as well as three economic indicators for April. After that the following significant data will be released only on June 27.

BRENT OIL

The Brent oil price has slightly stabilized after the rapid growth over the war in Iraq. Today at 14-30 CET the information on its reserves appears in the United States. The American Petroleum Institute predicts a decrease of 5.7 million barrels, while most analysts believe that it will be much smaller and reach 650-750 thousand barrels. Note that the U.S. is making significant efforts to stabilize the global carbon market. For example, the deployment of troops to Iraq is under discussion, in order to increase the oil extraction in the region from the current 3.3 million barrels per day to 6-8,4 million over the four years. In addition, the U.S. shale oil extraction is growing. Certainly, it falls out of the world market. However, due to this, the last year the U.S. oil imports reduced to the lowest point since 1996 and reached 7.7 million barrels per day. The U.S. total oil consumption amounts to about 19 million barrels per day, or around 22% of the world production.

XAUUSD - GOLD vs. US DOLLAR

The London Metal Exchange and the Chicago Mercantile Exchange are planning to abolish the price-setting rules for gold and silver by the end of the day. The London Silver Market Fixing Company announced the termination of the fixed daily price benchmark for silver on August 14th, which has been establishing during the last 117 years. The World Gold Council announced its plans to cancel the fixed daily gold price. This industrial and financial group has been establishing the gold price for the last 95 years. Still it is difficult to tell how it affects the cost of precious metals. Currently, the gold is getting cheaper against the background of the global stock market growth. As we have already mentioned, it is an alternative for the investments in financial instruments and moves with them in opposition. Theoretically, this can be used to create a personal composite instrument.

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