Saturday, June 22, 2013

Fed tapering plans knock out Wall Street, set dollar for best weekly gain in a year...

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This week all eyes were on the Federal Open Market Committee (FOMC), which was the major local and global market player and mover throughout this week as it ended its two-day monetary policy meeting yet the Federal Reserve said it may start paring stimulus measures later this year.
In fact Bernanke said the Federal Open Market Committee may reduce the pace of bond purchases modestly later in 2013, and may end the purchases around mid-2014, putting in mind that this reduction in stimulus will occur only if the economy shows signs of “substantial progress.”

Accordingly as stimulus prospects weigh Wall Street closed multiple times in red territories with the Dow Jones losing more than 200 points and the Standard & Poor Index shed more than 30 points while that the EU shares closed in red several times.

If truth be told the Fed maintained its monthly $85 billion of bond purchases, with the U.S. economy and particularly its labor market are recovering. The Fed said that the purchases will continue until “the outlook for the labor market has improved substantially in a context of price stability” and that it will continue to reinvest maturing securities.

Furthermore Fed Chairman Ben S. Bernanke said at the regular press conference that follows the end of the two-day meeting for the Fed’s monetary policy makers, that the Fed sees a moderate pace of growth in the U.S. economy, while unemployment levels are still elevated.
Interest rate increase would not occur anytime soon. Bernanke added. However, Bernanke said the reduction represents unanimity between the Committee members.

Also on interest rates, Bernanke said the 6.5% unemployment is a threshold and not a trigger for an interest rate rise, and that if it hits that threshold, the Fed then will evaluate the option of increasing rates, and the Fed will also look at inflation rates, which are still well below the Fed’s target.

Bernanke also said inflation levels remain below the Central Bank’s objective of 2 percent and has remained subdued for some time now, and likely to move back towards the target of 2 percent, and added that the central bank will closely monitor inflation levels.
On the other hand this week a report showed that more employees in the U.S. had filed applications for jobless benefits in the past week, indicating lingering weakness in reducing unemployment amid second-quarter slow growth.

In fact Initial jobless claims rose 18,000 in the week-ended June 15 to 354,000, from a revised 336,000in the previous week. Analysts had expected for a slight gain to 340,000. Labor Department data showed Thursday.Yet general business conditions in the Philadelphia region improved significantly in Jun at the fastest rate in two years, according to a survey of manufacturers by the Philadelphia Federal Reserve.

If truth be told the general index soared to 12.5 in June, the highest since April 2011 after a drop to 5.2 in May, overtaking estimates that called for a slight improvement to minus 2.0. A reading of zero is the dividing point between expansion and contraction in the region.

Also Manufacturing activity in the New York region rebounded in June, highly above analysts` estimates, but remained weak in details, as new orders and shipments decreased having the Empire State manufacturing index improving in June to 7.84 from negative 1.43 in May.

All eyes were on the Federal Open Market Committee (FOMC) this week, which was the major local and global market player and mover as it ended its two-day monetary policy meeting. 


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News Source: www.reuters.com