Bobbys Corner-Open Market-Jan.27.2010

Good Morning:

With speculation that the world wide economic recovery is slowing, the JPY has been one of the main benefactor as their currency rises, and investors look at the JPY as a refuge.  With the EZ having some problems with certain member countries sovereign debt, the Euro will stay under pressure.
GBP rose on speculation that the UK government may pause their bond purchase program.

World equity markets fell, and US futures are slightly higher.  Equity markets, like all markets, are concerned that the global recovery is losing traction and may falter.

The FOMC has been meeting, and we will be expecting a statement at 2:15 PM this afternoon.
The FOMC is expected to keep interest rates stable-and all eyes will be on any change in their wording of the economy.

Oil:$75.06                                      Gold:$1096.30

HAVE A GREAT DAY & GOOD LUCK

Bobbys Corner-Open Market-Dec.17.2009

Good Morning:

The USD soared overnight after the FOMC announced no change in interest rates, and are considering scaling back on the stimulus programs.  The USD also benefited from the bad news from Greece.  The markets are getting concerned about the enormous national debt that many countries have.  Countries like the US  increased their debt to put various stimulus measures in place.  Not only is Greece a problem, but the markets will be looking at Spain and the UK for a possible downgrade.

World equity markets fell, and US futures are pointing to a lower opening later this morning.
Oil and metals were also lower.

Oil:$71.96                              Gold:$1120.20

 

HAVE A GREAT DAY & GOOD LUCK

Bobbys Corner-FOMC-Nov.4.2009

Hello All,

As expected the Fed kept interest rates unchanged at .25%

We are looking at the FOMC statement to decipher any changes regarding the timing of any future interest rate decisions.

FOMC Decision and statement analyzed line by line.

Today at 2:15 the Fed will announce there views on the economy via their statement.  The one thing certain is that they will keep the rate anchored at 0.25%.  In prior statements they have said that the target rate would stay at the current rate for an “extended period.”  I would not think that “extended period” was one month.   

Where they might differ is in the other nuances of the statement with a slant toward a slightly more positive statement.    The Fed has to transition the monetary and fiscal policy changes.  We know there is no cash for clunkers anymore.  We know that the housing mortgage allowance is scheduled to lapse at the end of November.  We know the Fed purchase of Treasuries is likely over and that mortgage purchases will continue as a means to continue to support the housing market which is still the main driver for the economic health of the economy.  The support will gradually be phased out, but it is likely too soon given the high unemployment.   The positive is there is likely to be some inventory replenishment.  Employment may continue to stabilize. 

Below is the statement from the last meeting.  I have broken up the statement by parts and put my comments in italics/bold. 

———————————————————————————————————

Information received since the Federal Open Market Committee met in August suggests that:

Economic activity has picked up following its severe downturn (Still true). 

Conditions in financial markets have improved further, and activity in the housing sector has increased (Still true). 

Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit  (Still true.  They may add that employment conditions are showing some stabilization and housing in the lower end is picking up, while the higher end continues to be weak due to tighter credit conditions) 

Businesses are still cutting back on fixed investment and staffing, though at a slower pace (HMMM.  May soften this wording a bit?);

They continue to make progress in bringing inventory stocks into better alignment with sales.  (Still true. They may speak to inventory replenishment. This added 0.94% to 3rd quarter GDP)

Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability. (Still true). 

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time. (Still true). 

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability.  The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.  (Still true). 

To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt.  The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010.  (Still true). 

As previously announced, the Federal Reserve’s purchases of $300 billion of Treasury securities will be completed by the end of October 2009. (It ended at the end of October as planned) 

The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.  The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.(Still true).

Bobbys Corner-Open Market-Nov.4.2009

Good Morning:

The USD and JPY dropped overnight on speculation that the FED will not raise interest rates this afternoon, and that the FED will reiterate  past statements that rates will stay on hold for an “extended period”.  The markets will be looking for any changes in the FOMC’s statement regarding the economy and interest rates.

Worldwide equity markets and commodities rose overnight.  Gold reached a record high of $1095/oz.  US Futures are pointing to a positive opening this morning.

On the US political front the Democrats lost 2 key Governor races.  Both New Jersey and Virginia favored the Republican candidates, over the Democrats-who were both supported and campaigned for by President Obama. Republicans  will now be the occupants of their statehouses.    

Oil:$80.19                   Gold:$1089.12Today’s data:
FOMC Rate Decision at 2:15 PM this afternoon.

Have a GREAT DAY & GOOD LUCK

FOMC Decision due at 2:15 PM

The Fed will likely keep the tone to “cautiously optimistic”.   The optimism is likely to come from a stability/small bounce off low levels.  This is not necessarily a great thing as we are at low levels and at some point the economy can’t go lower.  The employment job slowing is an example of this.  At some point, most of the job cuts have been eliminated. 

Regarding asset purchase program, it is likely the Fed continues on their course (300 billion is earmarked and scheduled to be complete in September).  The risk of higher rates is certainly not a welcome development for the Fed and they cannot risk the implications from that potential move should they cease the program (i.e. start that leg of the exit strategy). 

Regarding rates, the Fed is likely to be on hold for some time and will likely not pigeon hole themselves by putting a schedule on tightening.

How will the Forex market react?    I do not think that what they say or don’t say will not be a shock to the market.  However, the price will most likely have a volatile period immediately after the report.  Once settled however, I think the story of the day continues.    That story today does seem to be more focused on weakening the other currencies rather than strengthening dollar. However, by default, the dollar is likely to continue to rally.

FOMC Meeting Minutes Released.

•  BOARD ANTICIPATED EXPANDING TALF TO AID FINANCIAL RESCUE
•  FED BOARD DISCUSSED WORKING WITH TREASURY IN FEB. 7 CALL
• AGREED ON SUBSTANTIAL PURCHASES OF LONGER-TERM ASSETS
• GAIN HOUSING STARTS NOT BEGINNING OF NEW TREND
• ECONOMIC DECLINE ABROAD HURTING U.S. EXPORTS
• EXPECTED FURTHER EMPLOYMENT CUTBACKS
• FED POLICY MAKERS SAW INFLATION BELOW DESIRABLE LEVELS
• EXPECTED GDP TO EXPAND SLOWLY IN 2010
• EXPECTED GDP TO FLATTEN OUT’IN SECOND HALF
• CUT FORECAST FOR SECOND HALF 2009 AND 2010
• MY WORSENED MORE THAN THEY EXPECTED, MOST OFFICIALS SAID
• SAW RISK TO ALREADY WEAK ECONOMIC OUTLOOK
• SAW TIGHT CREDIT, FRAGILE MARKETS, MORE PRESSURE ON BANKS
• SAW DOWNSIDE RISKS PREDOMINATING AT LAST MEETING

The headlines are justifiably sanguine.  The Fed announced the aggressive quantitative easing measures including Treasury purchases and MBS in an attempt to keep mortgage rates down for home owners.   There is nothing suggesting any rebound in the report.

Central Banks announce plan to give Fed access to foreign currency

The major central banks (Fed, SNB, BOJ, BOE and ECB)announced a plan this morning whereby the Fed would have access to swap arrangements for Euro, Yen Sterling and Swiss Francs if the need arose.  The Fed would act as the conduit to US financial institutions who may not be able to cover shortfalls in foreign currency balances.   This arrangement has been authorized through October 30th. 

This is probably a precaution taken by the Fed and Central Banks in case of a need by a US institution.  One wonders if knowledge of the stress test results to be announced later this month prompted the action, however.

The move should not have an effect on currency values.

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