Take on Tom’s tips concerning the weakening of the Kiwi Dollar and the Japanese Yen on one hand, and the strengthening of the US Dollar and Euro on the other. This situations leads to a potentially profitable situation.
Fed Said to Seek Cuts to Stimulus
In a follow up to the release of the minutes from the Federal Reserve’s Federal Open Market Committee’s recent meeting on the month of July that was discussed here yesterday, the members indicated that they are supportive of beginning to step away from their quantitative easing measures, possibly as soon as September.
In their meeting, the committee noted that should the employment situation in the United States continue to improve in line with its current progress as has been seen over the course of the past six months, then they would support Federal Reserve Chairman Ben Bernake in his effort to reduce their involvement in the recovery. It should be noted that Bernake has made a string of measured remarks in recent months in favor of cuts to the $85 billion stimulus that have left investors guessing what steps he is prepared to take, and on what sort of timetable such actions would operate on.
Analysts point to speculations over the future of the stimulus that have gone on in recent months as having played a significant role in much of the volatility that has been witnessed in the markets. As such, news of a possible change to the the current monetary policy will most likely be welcomed by investors seeking to increase their dealings with the US dollar.
Investors should be reminded that any shifts in the Fed’s policy towards the stimulus remains dependent on the job numbers, as the FOMC will take them as a primary indicator in advancing towards the cuts. It is also uncertain how realistic the purported September start date for the cuts to begin is at this time. That said, the fact that the committee was prepared to publicly express their support for Bernake’s initiative, points to increased expectations and confidence in the US economy that has enjoyed a long run of positive growth in its reports in recent months.
Traders are advised to proceed with extreme caution.in approaching the USD in its pairings as the market will likely respond with considerable shifts to the news. Moreover, a general uptrend may appear for the USD as the cuts proceed in the following months.
Aussie Enjoys a Reprieve Thanks to China
It was reported on 22 August 2013 that after a run of significant losses for the Australian dollar in recent weeks, the Aussie succeeded in gaining value against many of its rival currencies in trading. Analysts point to the release of a report detailing signs of growth in China’s manufacturing sector that has faced negative figures over the course of the past four months as playing a significant role in the rally. Analyst note that Australia’s economy is often affected by the status of the Chinese economy, and as such it is crucial to keep a constant eye out for shifts there.
While the Aussie has received some relief for the time being, many experts are remaining cautious in the meantime by not moving too aggressively on the currency, believing that the Reserve Bank of Australia may decide to cut key rates in the coming month in an attempt to help boost the economy through calculated devaluation.
Analysts advise traders to exercise caution in trading the Aussie in its pairings over the coming days as it would appear to be somewhat less than stable for the time being.
CAD Takes Further Hits Following Retail Report
In more bad news for the struggling Canadian dollar, many experts believe that the issuing of the Retail Sales report today will likely depress the Loonie even further. While waiting for the exact figures from the report, most observers foresee a reduction in consumer sales for the northern economy that has suffered in recent months due in part to unsatisfactory job numbers and increased volatility in the oil market, a key Canadian export.
Analysts note that the Canadian economy has also been dogged by the much stronger American recovery. News out of Washington that the Federal Reserve will likely start cutting the stimulus possibly as soon as next month will likely cause further concern for the CAD.
Traders are advised to proceed with caution on the CAD in its pairings, in particular with the USD as the American dollar will likely beat out the vast majority of its rivals in the coming days.