Bernanke will try to have some cake and will eat it too...

www.cfb.ae

 Bernanke is really in the hot seat today – both in terms of potential market responses and politically, as lawmakers’ attention directed the US Federal Reserve’s way is becoming increasingly glaring. The first Bank of Canada meeting under new governer Stephen Poloz is also on tap today.

The Bank of Japan meeting minutes overnight drew yawns from the market audience as the rhetorical line seems to be “implement what we have promised and it will take some time to judge the success of our policy” while anticipation is more important on the political front with this weekend’s upcoming Upper House elections. There were minor expression of concern by some members, but the unanimous decision was to stay the course on current policy.

Equity markets finally had a negative day yesterday, after a remarkable string of positive days, and bonds are looking well supported. If Bernanke follows up with more relative dovishness today without asset markets bulling sharply higher, this would appear to be the most USDJPY negative outcome. USDJPY bottomed out – you guessed it – right near the Ichimoku cloud area overnight – triple underlining the focus on this indicator, which has dropped several pips today and is closer to the 98.85 level now.

Looking ahead Bernanke testimony

 

Remember that Fed chairman Ben Bernanke’s full testimony today will be released at 1230 GMT before he actually presents it at 1400 GMT, followed by what is likely to be a very lively Q&A session, with Bernanke in the hot seat as I’m convinced that Republicans are increasingly making it a part of their party platform to remain critical of the Fed as the “Washington enabler”, with the endless irony that it is Republican constituents (the wealthy) that have benefitted the most, relatively speaking, from Fed policy over the last several years.

What the Fed would like to communicate, in my opinion, is that it is ready to act either way depending on incoming data, but that as things stand right now, it would prefer for bond yields to come back down some while it has no interest at all in driving too much exuberance elsewhere. Can it pull this off? If this message is successfully delivered, USDJPY may offer the most volatility.

Meanwhile, a Bernanke reminder that confirms expectations for tapering and leaves the market to take its guidance from incoming data rather than Fed signals would be more clearly USD positive, with trade selection depending on the asset market response (scary drop in equities could still push JPY higher, but EURUSD or GBPUSD might offer a more straightforward strong USD response in this instance).
Regardless of the message Bernanke delivers, the worst potential outcome in the following days would be a brief squirt of USD weakness followed by strong signs of support. If the USD is going to move to the strong side right away on the heels of the Bernanke testimony, I would look to EURUSD and GBPUSD for the most important signs of a reversal.

Contact Us:

Asad Rasheed
Direct:04-3841906
Email:asad@cfb.ae
Email:info@cfb.ae

For more information please visit our website century financial brokers.

 Here are some useful links that you can follow:

Here is a CFB blog that gives useful daily Gold Analysis on dailybasis.

You can also follow CFB on facebook (useful advice on posts regularly)

Here is another blog that provides regular news and information and is very useful for Forex Signals.

News Source: www.cnbc.com 

Fed Exit Strategy Will Be ''Treacherous''...

www.cfb.ae

As the Federal Reserve's Open Market Committee begins a two-day meeting, economist Nouriel Roubini and political scientist Ian Bremmer warned that the Fed's monetary easing exit strategy would be "treacherous" and would lead to financial instability.

"We know how the movie ended, and we may be poised for a sequel. The weak real economy and job market, together with high debt ratios, suggest the need to exit monetary stimulus slowly. But a slow exit risks creating a credit and asset bubble as large as the previous one, if not larger," they wrote in a report published in Institutional Investor magazine.

Roubini, better known as "Dr. Doom" for his pessimistic economic forecasts, and Bremmer, president of global political risk research and consulting Eurasia Group warned that the real underlying risks to the global economy were being ignored.

In the report, they warned that market complacency among politicians, investors and central banks was leading us into a "New Abnormal" era - a "period in which every market assumption must be questioned and the wise investor is prepared to be surprised."

"Unfortunately, the sense of crisis has lifted on all fronts, encouraging some to see in the changed landscape a sustainable 'new normal', a period of painfully slow but predictable economic progress," they said.

"Some believe that U.S. lawmakers can now afford to postpone tough choices, the Europeans will muddle through, China can smoothly rebalance its economy, and fires in the Middle East can simply burn themselves out. These are dangerous illusions," the authors said.

"The convulsions of the past five years arose from structural faults – financial, economic and political – that have not been fully resolved," despite the exuberance in financial markets.
There were more reasons why political and market turbulence had "plenty of room to run," the authors said, telling investors to expect more political and policy gridlock, market volatility and even another crisis as governments' monetary policies reached a crossroad.

Global markets had focused on the wrong risk triggers for the last five years, Bremmer told CNBC late on Monday."For the last five years our focus has been on the financial crisis - on the fiscal cliff, will the euro zone break down, will Japan crumble under its debt? And the reality is that those were not serious structural risks, those were much more stable places," Bremmer told CNBC's "Closing Bell."

"We have to start paying more attention to the real risks because they're growing every day, both the macro pieces that are truly in play and we've not seen anything like this in generations with global powers having very different perspectives on the market place and politics," he added.
The authors added that there were more, new worries posed by emerging markets as growth slowed there and governments were slow to implement reforms.

Bremmer warned that the relationship between China and the U.S. would be key.
"Whether we're talking about cyber, whether we're talking about market access, trade secrets of trade craft, the relationship between China and the U.S. is very difficult to manage and it's not been given priority by either the Chinese or U.S.," he said.

"A pragmatic, mutually profitable geopolitical partnership forged by the U.S. and China is our best hope if the New Abnormal is to end with a smooth landing," Bremmer and Roubini concluded.

Contact Us:

Asad Rasheed
Direct:04-3841906
Email:asad@cfb.ae
Email:info@cfb.ae

For more information please visit our website century financial brokers.

 Here are some useful links that you can follow:

Here is a CFB blog that gives useful daily Gold Analysis on dailybasis.

You can also follow CFB on facebook (useful advice on posts regularly)

Here is another blog that provides regular news and information and is very useful for Forex Signals.

News Source: www.cnbc.com                           

Gold drops as traders await For FOMC...

www.cfb.ae

Gold futures fell Monday, with analysts anticipating choppy price action as traders position themselves ahead of a Federal Reserve policy meeting later this week that will be closely watched for clues to the central bank’s next monetary-policy step.

Gold for August delivery GCQ3 -0.28% fell $5.90, or 0.4%, to $1,381.70 an ounce on the New York Mercantile Exchange. Particular focus will be on the FOMC [Federal Open Market Committee] meeting, considering the recent rise in government bond yields. We think risks for gold remain to the downside as central banks are unlikely to announce more easing,” said Valérie Plagnol, strategist at Credit Suisse.

Higher bond yields can make gold less attractive because the metal carries no yield. Higher bond yields can also make for a stronger dollar, which is negative for commodities priced in the currency because it makes those goods more expensive for customers holding other currencies.

Fed Chairman Ben Bernanke in May said that policy makers could move as early as the “next few meetings” to begin paring back the monthly bond purchases at the heart of the Fed’s quantitative-easing strategy. U.S. Treasury yields have risen substantially in the weeks since those comments, sowing turmoil across asset classes as investors grappled with the prospect of a cut in the central-bank-provided liquidity credited with helping lift gold, equities and other assets in recent years.

Most analysts, however, don’t expect the Fed to announce any tapering of its bond-buying program when the policy-setting FOMC concludes its two-day meeting on Wednesday. Bernanke will hold a news conference after the conclusion of the meeting. Read: Bernanke will try to herd wild markets at meeting.    

 Some strategists contend worries over tapering are overblown. And a story last week in The Wall Street Journal indicated Bernanke wants to reassure investors that an eventual tapering of the Fed’s bond-buying program won’t be accompanied by any immediate hike in interest rates, which are expected to remain near zero.

Gold prices have suffered from concerns the Fed will scale back stimulus efforts. Gold over the past few years has benefited from fears the Fed’s aggressive stimulus efforts would debase the dollar and boost inflation.

Meanwhile, overall investor flows remain bearish, wrote analysts at Barclays. They noted that outflows from exchange-traded gold products have slowed, but that tactical investors have scaled back gold exposure during the week ended June 11. But data show gross short positions are less than one lot off the record high seen only two weeks ago, they noted, which means scope for another short-covering rally remains elevated.

“The Fed quitting its stimulus programs might be feasible if the economy were truly on a massive recovery and inflation were rising,” said Keith Springer, president of Springer Financial Advisors, in a note Friday. “However, tame inflation and lower global growth estimates from the International Monetary Fund indicate the world’s central banks won’t pull back anytime soon.”

But T. Rowe Price said it believes the Fed is on track to begin reducing the pace of asset purchases during the summer quarter.

“The labor-market outlook has improved since the program’s inception in September, downside risks in the economic outlook have diminished, and a revival in consumer-credit-card footings is among reasons to have greater confidence in forecasts of a gradually improving growth profile,” T. Rowe Price chief economist Alan Levenson said in a report late last week.

Contact Us:

Asad Rasheed
Direct:04-3841906
Email:asad@cfb.ae
Email:info@cfb.ae

For more information please visit our website century financial brokers.

 Here are some useful links that you can follow:

Here is a CFB blog that gives useful daily Gold Analysis on dailybasis.

You can also follow CFB on facebook (useful advice on posts regularly)

Here is another blog that provides regular news and information and is very useful for Forex Signals.

News Source: www.marketwatch.com