Wednesday, 27 July 2016 09:15

Market waiting for the Fed meeting results

The continuous price rise of the dollar has temporarily halted when greenback dropped again against most of the major currencies during yesterday's trading session due to taking profit by investors after US dollar index measuring the strength of the dollar against a basket of currencies, goes to its highest level for 4 months. Besides, the carefulness before Fed meeting result made investors reduce bets on the greenback.

The result of periodic policy meetings of Fed will be announced today, and the agency is expected to keep interest rates at this meeting. However, investors will closely watch policy statements issued after the meeting of Fed in order to know about the current situation and prospects of the US economy. The recently released data show retail sales, consumer prices, and industrial production in the US in June rose further. Meanwhile, reports of non-agricultural jobs in June announced earlier this month, also stressed the labor market is recovering strongly and allay concerns about the deceleration of economic growth. The positive data in the US economy prompted investors to increase expectations that Fed will raise interest rates before the end of this year.

According to observers, after the relatively peaceful attitude in June, this announcement of Fed may indicate a more optimistic tone before the improvement of recent economic data. However, do not exclude the possibility that the Fed expressed a cautious view when the agency is awaiting the evaluation of the impact of the UK to leave the European Union for the outlook of the US economy before making any orientation interest rate policy in the coming period.

The yen this morning decreased sharply after Reuters reported the Japanese government is expected to issue 50-year-bonds to support the big fiscal stimulus program which will be launched. However, the currency subsequently bounced back as Japanese Finance Ministry denies rumors related to 50-year bonds. Also this morning, Prime Minister Shinzo Abe said the fiscal stimulus package in this time values over 28 trillion yen (265 billion dollars) and details will be announced next week. Information about the strong package of government will be announced before the meeting shelf of the Central Bank of Japan (BOJ) held on Friday, 29th of July. Analysts predict the BOJ will ease monetary policy further and most likely the agency will increase the size of the bond purchase program from 80 trillion yen per year to 100 thousand billion yen while reducing interest rates on deposits from minus 0.1% to minus 0.3%.

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Published in Trading strategies

Japan considers issuing 50-year bonds

Japan is currently considering a possibility of issuing 50-year bonds. That’s going to be the first issue of such bonds and the longest maturity of Japanese government debt in the postwar epoch. The Japanese authorities are simply eager to take advantage of the ultralow rates resulting from the BOJ’s monetary easing, as sources already familiar with the matter state.    

The given move could contribute to observations that Tokyo’s growth-revival plan is getting quite similar to so-called helicopter money, especially considering if Japan’s major bank purchases the debt later as part of its campaign to stop deflation.

Well, if the Japanese government makes up its mind to go ahead with its 50-year bond plan, then an outline of it could be officially announced as part of an economic-stimulus package the administration of Prime Minister Shinzo Abe is expected to unveil in coming days. Apparently, the 50-year bonds could be released as soon as the current fiscal year, which ends March 2017.

Bonds

China’s Politburo wants to keep Yuan steady

China’s all mighty Communist Party Politburo has made up its mind to raise domestic demand by simply cutting taxes. The governing body has stressed that the given move is expected to keep the country’s national currency rate steady.

The Chinese government is on the verge of implementing policies to drastically relieve the burden of taxes as well as fees on companies in this Asian country, as Xinhua News Agency posted on Tuesday.

Apart from that, the Chinese government is going to boost its efforts aimed at fending off financial risks while maintaining the national currency exchange rate at rather a reasonable level. That’s what market participants can learn from the Xinhua report published following a Politburo gathering chaired by President Xi Jinping.

Downward pressure on economic growth is still huge and there’re some serious risks, which require high attention, as the Politburo states, without specifying anything.

Besides this, the Politburo vowed to stabilize market hopes with steady economic policies, thus reiterating recent official remarks.

 

Published in World economy

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