Trivial Announcements Result in Minimal Markets Movement 9.9.2013
Due to continuous conflicts in the Middle East the US Dollar portrays weak figures, while subsequently the AUD, CHF and GBP present steady strength. Regardless of this slow market day and the lack of decisive market movements, Tom observes potential Call options which can save a poor trading day and turn it into a profitable trading day. Watch Our Daily Market Review by Tom Williams
Gold Prices Drop on Speculation of Fed Reduction to Stimulus
It was reported on 9 September 2013 that the price of gold has continued fall in the lead up to an expected tapering of stimulus by the Federal Reserve. As has been previously discussed in these reports, the Fed’s FOMC board has expressed their intention to reduce their quantitative easing measures in reaction to apparent signs of recovery within the American economy.
For their part, investors view the reduction of stimulus as an indication that the US dollar has returned to its position as a haven asset and is likely to continue to grow in value over the coming fiscal term. Moreover, investors appear to be abandoning both the emerging markets such as India, Thailand, Brazil and others in favor of the developed Western markets that have moved significantly in their economic rebounds. In conjunction with this move towards the strengthening USD, investors have lowered their interests in haven commodities such as gold, which was used by many as an asset during the recession. With the return of the dollar, demand for the precious metal will likely continue to drop.
While prices for short term deliveries for gold have dropped, many hedge funds have increased their bets on gold, believing that the looming conflict in Syria may serve to boost inflation as well as the price of crude. In such cases of inflation it should be noted, many investors have generally turned to gold and other commodities as stable investments for stashing their funds.
Analysts also note that the level of reduction to the stimulus by the FOMC will likely be directly related to the US employment numbers as well as other growth factors. It was reported last week that the US had increased the number of jobs significantly, albeit slightly below previous expectations. For its part, US manufacturing was said to have continued its impressive gains during the month of August 2013, adding another month of growth for that crucial sector that is vastly influential in the nation’s GDP.
Traders are advised to proceed with caution as there remains a possibility that the price of gold will continue to drop further in the near future.
Tokyo Olympic Announcement May Mean Boost for Yen
Japanese Prime Minister Shinzo Abe’s recovery efforts received a beaming breakthrough with the decision by the International Olympic Committee that Tokyo will host the 2020 summer games. It was reported on 9 September 2013 that Japanese stocks had risen significantly in response to the news, adding further to consumer confidence that is essential in pushing towards strengthening the economy.
While analysts note that the games remain nearly seven years away, many believe that Japan may start to feel a gain in the near term as industries such as construction begin to pick up speed. Moreover, current estimates have stated that around 150,000 jobs can be expected to be added in connection to the games.
That said, due to the long lead up time preceding the 2020 Olympics, there is unlikely to be a conclusive series of notable gains that can be credited to the games. In the meantime, the government is likely to continue on its current path as laid out by Abe, which includes reforms, stimulus, and monetary easing. While some have pointed to the games as a potential ‘fourth arrow’ in his recovery plan, analysts do not believe that it will play significant short term dividends at this point. The primary stated goal of the government has been directed at tackling the deflation that has hounded their economy in recent years. Recent reports have shown that the nation’s GDP has risen, perhaps indicating that they are moving in the right direction inline with the ‘Abenomics’ plan.
With the apparent boost from the announcement of the games, the Yen is likely to receive some short term gains before resettling within the market. As such, traders are advised to proceed with caution on the Yen due to the probable volatility that will likely be affecting its value in the market at this time.
New Zealand to Declare Rate Decision on Wednesday
The Reserve Bank of New Zealand is reportedly set to issue its Cash Rate Decision on 12 September 2013. Readers are reminded that this rate can be influential in its effect on consumer loans, and mortgage rates, as well as on bonds.
At this time, many experts believe that the current rate will likely remain constant as it has over the past two months. Analysts believe that the members of the board from the Reserve Bank are hesitant to cause any changes to the system at this point that may interfere with their recovery efforts to shore up the economy.
The Kiwi has experienced a number peaks and valleys over the past month as it and the neighboring Aussie have faced varying volatility. Analysts advise traders to proceed with caution despite the fact that there is a very low probability of shifts to the rate.