EURUSD 1.1169 |
USDJPY 108.41 |
GBPUSD 1.2953 |
AUDUSD 0.6856 |
USDCAD 1.3123 |
GBPJPY 140.45 |
EURJPY 121.11 |
AUDJPY 74.33 |
CADJPY 82.60 |
Silver 17.53 |
As most major central banks are back into, or close to negative interest rates, and the Federal Reserve is pulled back into injecting emergency liquidity for the first time since 2008, will the US central bank be eventually forced to return to buying bonds for the 4th time? Will Quantitative Easing 4.0 happen? If so, when?
Obtaining the required 320 votes to back Saturday's passing of the Brexit deal will be tough but not impossible. If the deal passes, we expect gaps in cable to as high as 1.3180s. How about if Parliament rejects the deal? Will it depend on the margin of defeat? Will a rejection by a 2-vote margin have a different GBP impact than 15-vote margin? We saw how GBP retreated on Thursday when the DUP said it will vote against the deal in parliament, making unlikely the deal will pass in its current form. More on the necessary numbers in here. As I write this, GBPUSD has spiked 0.3% to 1.2932 on reports that the Brexit deal will be passed tomorrow.
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GBP-USD Yield Spreads
As GBP becomes the 2nd highest performing currency in the G10 since the start of the year, posting daily gains not seen in 10 years, here is a look at the current yields situation, with GBP...
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21-yr Intermarket Charts - 7 indices 11 currencies 14 commodities
Interactive charting by instrument, chronological and alphabetical order. This enables organizing each individual commodity, currency or equity index' performance by magnitude or chronological order.
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ECB Action Sheds Doubts on Yield Differentials
Can the euro gain despite the latest rate cut. Before we cover the aftermath of Thursday's drama-fillled ECB decision, let's backtrack for a bit.
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Ashraf
But from mkt point of view, if the slow down is in next 6 months, then dont you think, the announcement of QE4 will nullify its effect & it might prop up the mkts.
CentBank independence is crucial because it is in the interest of the economy --only when applied correctly. Any govt interference for political means is like taking steroids before a race, which you may win, while ignoring the long term side-ffects.
Deeper slowdown near end of Q1 2020.
Ashraf
I didnt mean "Fed will do QE4 for political purposes".
What I meant was "Is FED really independent? I mean is there even a 1% probability of it getting influenced/pressurized? If the answer is yes, then the above argument is defeated & FED can very well take influenced decisions!!
In India atleast the Reserve Bank Of India isnt independent? Infact, why should any reserve bank should be for that matter? If I am the head of govt, I would like my reserve bank to act in a certain way which I believe is good for economy.
Also, as per what I have gathered from your thoughts, you see economy in dire straits by Q12020. Correct?
Im not sure if i understood correctly, but your post seems to imply that the Fed will do QE4 for political purposes? I dont think that is the case. I continue to expect that any decision by the Fed to trigger QE4 would be out of economic need (deepening yield curve inversions) rather than pressure from Trump.
So it would be for the Fed to worry about that would look, not for Trump
I do not see him being impeached. But if he does, it would be a major negative event for the market.No doubt.
Ashraf
My belief of "QE4 will drive higher the long-term borrowing cost" is given!! But as you rightly said, from when?
As far as using QE4 to drive up the stock markets is concerned, I still believe Donald Trump doesnt care about popular beliefs like politically-motivated QE4 decision etc. He will do what he wants to do!!
He simply wants to boost his 'resume' by propping up the stock markets nothing else!
Btw if in case Trump is impeached, will the overall scheme of things fall apart including QE4? Will everything go for a toss?
I agree with your choice Q12020- Perhaps Fed will signal the start of QE4 at the March 2020 FOMC meeting.
With regards to your point about 2020 being a presidential year, this in fact could be a deterrent (obstacle) to the Fed doing QE because it would not want to be seen as delivering a politically-motivated policy decision.
It's interesting you say QE4 will drive LT borrowing costs. If you're referring to QE4 driving up 10-year yields, then I would assume that QE4 would have to be deemed so inflationary to the extent of boosting yields. The question is: At what point in time would yields rise after the start of QE4. We shall see.
Ashraf
QE4 is as INEVITABLE! Should happen as early as Q12020.
Reasons:
1. FED need to increase money supply as early as possible because since 2008, its for the first time it has injected emergency liquidity! Balance sheet expansion have to happen!
2. 2020 is presidential year. Need a booster dose at a right time (atleast 2 qtrs) for equity markets to perform because Trump's barometer is stock market.
But QE4 will drive higher the long-term borrowing cost!