The Federal Reserve, FED, delivered according to
expectations and launched another aggressive stimulus program on Thursday. FED
would pump $ 40 billion monthly into the US economy it sees a sustained upturn
in the employment. It is the first time that FED ties its controversial bond
buying directly to economic conditions. It represents a big escalation in US
efforts to fight a weak jobs market.
Immediately upon FED’s announcement global markets rallied.
US stock exchanges raised to a five years high followed by a 2,5 % jump in
stock prices in Asia this morning. Commodity and precious metal prices are
skyrocketing led by oil, copper, gold and silver. The dollar is falling against
all currencies. Euro/USD bounced back through the 1,30 level and is trading at
1.3024. USD/Yen is 77,63. Gold hit a six month high at 1765 as investors braced
for higher inflation. Brent crude is 116,50 also triggered by increased tension
in the Middle East.
The new program would be concentrated on purchase of
mortgage-backed securities, so called MBS, to encourage the housing sector
which FED chairman, Ben Bernanke, called “the missing piston” in the US
recovery. Bernanke said that the employment situation remains of grave concern.
FED further decided to stick to its low interest rates policies at least to
2015, half a year longer than earlier announced.
The new program would be met with criticism. Republicans see
FED’s action as an effort to help President Obama’s reelection and as a
confirmation of failed economic policies. The stimulus measures would weaken
the dollar. Many observers see FED’s initiative as a clear token of currency
manipulation making American products cheaper in an effort to increase US
exports and create jobs. If FED’s measures on the other hand succeed in turning
the US economy around, it would spur the whole global economy again with US as
its major engine. In the first place, however, FED’s initiative have given
global stock market investors and precious metal believers a reason for
jubilation.
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