GDP figure from the US on Friday was better than expected, but nevertheless a minor decline from the previous quarter from 2.0% to 1.5%. Trading on Friday indicates that the market is increasingly discounting QE3. The question is whether QE3 will be launched on Wednesday. We do not think so. It appears more obvious to wait until September so that the Fed committee will have another two employment reports to use as a basis for its decision and that the announcement is made at a monetary-policy meeting with subsequent press conference (at the end of August Mr Bernanke is scheduled to speak at Jackson Hole – an event which has served as a stage for the Fed's QE in recent years).
Market sentiment: indications are that the euphoria following comments by Mr Draghi and Mr Nowotny is slowly losing steam. The rise of the EUR/USD and EUR/JPY rates has stopped while US equity futures are in negative territory. There are plenty of economic indicators this week, which makes it difficult to have confidence in technical levels. Currently, the market is in an uptrend (up for equities and risky assets) and the budding signs last week of a breach of the trend were quickly stopped by comments by Mr Nowotny and later Mr Draghi.
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