The American Federal Reserve's Federal Open Market Committee is expected to make a number of important announcements tomorrow Wednesday 29 January 2014 regarding the stimulus program and the interest rate. Concerning the pace of treasury and MBS buying, many experts believe that the FOMC will likely look to reduce purchases further as they move forward into the new year. As for the interest rate on lending for the dollar, experts expect that the Fed is unlikely to make any changes from the standing rate at this time.
Readers are reminded that following the start of the Great Recession in 2008, the Federal Reserve stepped in with a stimulus package that until last month stood at $85 billion, comprised of a combination of treasury and mortgage backed securities purchases aimed at bolstering the struggling economy. However, as the US economy was able to meet many of the key metrics for restored growth laid out by the FOMC, including lowering the unemployment rate, the monetary policy board opted to reduce spending as they deemed that the economy was beginning to show signs that it could start to stand independently. Following their decision, the stimulus spending was cut down to $75 billion. According to estimates by experts, the expectation is that the Fed will look to taper their purchases to $65, removing an additional $10 billion off the top.
Analysts believe that despite the lower than expected job figures for the month of December 2013, the FOMC will likely move to make these additional cuts. As has been noted in previous reports, investors are closely observing how the Fed is going about their tapering, and eagerly awaiting their decision. Should the Fed choose to reduce the stimulus further, it will likely boost the value of the USD in trading against its rivals.
In regards to the rate decision, analysts believe that the Fed is unlikely to be looking to make any moves that would scare off investors at this point. The currently low rates are conducive to growth as they make borrowing costs cheaper, and therefore encourage investment and expansion.
Analysts adviste investors to watch for significant shifts in trading following these announcements tomorrow as not only the USD will likely be affected, but other currencies with strong ties to the dollars as well as commodities such as precious metals and crude.
New Zealand to Declare Rate Decision
The Kiwis are set to issue their Rate Decision on 30 January 2014 New Zealand time for the coming month. At this time, many experts believe that the rate will likely remain unchanged as the Reserve Bank of New Zealand attempts to spur growth in their small economy.
Readers are reminded that these rates relate to the interest on borrowing costs that can affect all levels of the market, including loans and mortgages. As such, any shifts to these rates can have a significant influence on the nation?s economy. In addition, this rate is often used as a key tool by the central monetary authorities to control inflation, as well as to expand and contract growth.
Analysts note that the Kiwi is currently trading slightly below their counterpart the Aussie. That said, while some discussions have been floated in recent months about possible changes to the interest rate, it would seem unlikely that the central bank is prepared to move forward on this at this time.
Analysts do not expect to witness any considerable changes to the value of the Kiwi following the release of this report.
Oil Trades Down on Speculation of Rising Stockpiles
It was reported on 28 January 2014 that the trading at the West Texas Intermediate had fallen to a one week low. Analysts point to speculation by investors that an upcoming government report will indicate that the level of crude stockpiles in the US will have risen, thus increasing the levels of supply. The current figures for the level of the stockpiles will be released in a report tomorrow 29 January 2014 from the government agency, the Energy Information Administration.
Analysts note that the levels of oil supplies in the world?s largest oil consumer have been constantly shifting, causing waves in the market. As the speculation over the levels of supply fluctuate between highs and lows, it significantly affects the level of demand, and therefore the price as well.
Analysts predict that there will likely be further movements in the WTI in the coming days in the lead up to the release of both the industry backed American Petroleum Institute report, as well as the government?s EIA report which is due to come out tomorrow.