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Draghi’s Tone To Remain Dovish – Dec 05

December 5, 2013
The recent release of US economic data suggest that the growth performance in USA is at an acceptable level, though there can be an argument that pace of growth may not be at a desirable level. It is a reality that the rate of success is not at a faster pace because there is no real money in the system. All funding is generated through artificial means by printing money without back-up, which is inflating the size of FED balance sheet that has reached extreme point, as no effort has being made to match spending through revenue collection, as increasing of tax is a political risk for the any government/opposition.
But the problem is that FED has to apply break at some point, as FED balance sheet has probably reached a saturated point and has to slow down the speed to minimize to reduce the damage, as FED cannot continue to practice and apply this undesirable addicted method for the chosen few forever. Therefore, the short answer is that tapering has reached an unavoidable point and is required to act, it does not matter when.
Meanwhile, BoE and ECB will be making monetary policy announcement. BoE is unlikely to act, as the growth pace is at an acceptable level. For ECB it should be too early to announce policy changes, though credit expansion in Euro-zone is too slow, deflationary pressure still persist. German growth, which is considered the engine of Euro-zone region has shown sign of slowing down, which may not be good news. Economic prospects in Euro region is not very encouraging, CPI was again below 1 pct mark that may exert pressure on ECB President Draghi and instead he may opt to use Dovish tone to buy time and to send a clear message to the market about ECB’s future strategy, as it is too early to think of negative deposit rate.
However, market will continue to to focus on the release of economic data’s, though MPS is an important event of the day, but since tomorrow’s Payroll data could provide future FED guideline on tapering, sentiment could later in the day shift towards developments in USA.

 

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More Later…………………..

GMT 3:19 – GOLD @ $ 1239 = There was clear upside violation in gold as it is again required to move and close above $ 1245-47 that could be worrisome factor. During Asia/European session gold should find top around $ 1243 to test $ 1230-32 zones. Clear break is required to re-teat $ 1221 zones.
GMT 3:26 – EURO @ 1.3591 = Euro should hold below 1.3610-20 and unless break 1.36650 could be tough to attain. On the downside Euro is required to push below 1.3540-50 zones, as break of 1.3510 could encourage for a test of 1.3450-80 levels.
GMT 3:31 – GBP @ 1.6374 = I do not see easy break of 1.6395-00,as risk for fall is intact, a move below 1.6440 will encourage for deeper fall towards 1.6295-05 zones. or else 1.6430-40 levels remains a big challenge to crack.
GMT 3:38 – JPY @ 102.35 = We could see a similar pattern as of yesterday, but today Japanese currency should soon regain its weaker tone and will be sold on gains. Sell JPY against USD around 101.90-00 with Stops 101.50 for test of 102.85-95 levels.
GMT 3:43 – AUD @ 0.9048 = Aussie may not find easy to surpass 0.9080-90 zones as another dip and break of 0.90 is possible for 0.8970-80 and could exhaust at earlier levels. Only break of 0.9120 could bring some more relief for AUD

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