November 13, 2013 - Daily Market Analysis by Tom Williams
Watch Tom's analysis as he breaks down all of the recent events in the U.S. market and pinpoints potential trades for you.
Yellen Confirmation Hearing to be Held Tomorrow
The US Senate Banking Committee is set to hold a hearing tomorrow 14 November 2013 for Janet Yellen, President Barack Obama’s nominee for the position of Chairwoman of the Federal Reserve. The position is currently held by Ben S. Bernake, who has held the seat for the past eight years.
Readers are reminded that the appointment of Chair of the powerful US Federal Reserve is dependent on the approval of the Senate. After the president declares his nominee, the Senate begins a series of hearings that can often take on a political rather than professional character. In particular, under this president, many of his political appointments have been held up for considerable periods of time or rejected by the Republican opposition. While it is normal for some level of questioning and sometimes horse trading over the passage of nominees, historically, the Senate has been known to approve the vast majority of a president’s candidates for office. However due to the recent history of stonewalling by the Republicans, some experts note that Yellen’s approval process to the Senate could be held up, possibly scaring some investors who may be put off over the gridlock.
Analysts note that while many experts have expressed high levels of confidence in Yellen’s abilities due to her impressive professional background, there remains the possibility that her appointment may disappoint some traders. Yellen has been considered by many to be a dove when it comes to the role of government stimulus, often speaking of the need for intervention to help shore up the economy. In particular, some investors have expressed concern that she may attempt to prolong the $85 billion quantitative easing program that was put in place to help offset the effects of the recession. Yellen as well as Bernake have stated that lowering the level of unemployment is a key factor in how and when they would opt to make the cuts to the stimulus. It should be noted that many investors view cuts to the stimulus as a positive move and remarks of potential cuts have generally helped to boost the value of the dollar in trading.
Analysts also point out that should Yellen’s appointment pass the Banking Committee, additional changes to the structure of the Fed could possibly be expected. One point that has been brought up by experts is that she may try to implement a more coherent voice and direction for the Fed. It has been noted in the past that Bernake had ‘ruled by consensus’, allowing a more collaborative decision making process and his board members to speak more openly than had been commonly seen in the past. While this has led to higher levels of transparency, some experts believe that Yellen may attempt to create a more unified front and dominate the Fed with her own direction and directives.
Analysts believe that Janet Yellen will likely receive approval from the Senate Banking Committee at the end of the process. While some Republicans may desire to hold up her passage, they may decide that following the political gridlock that led to the government shutdown in October and hurt the US economy, that it may not be politically expedient to appear to be impeding the government’s financial body.
Should Yellen receive approval, analysts believe that traders will likely see some level of volatility in the market as it reacts and digests her appointment to the office and the potential effects that it may have on the dollar in trading.
Germany and EU to Release GDP Thursday
The Gross Domestic Product reports for the Eurozone and its largest economy are due to come out tomorrow. The reports will address the time period for the third quarter of 2013. At this time, many experts are expecting to seem some level of growth on GDP, analysts assess that it will likely be minimal.
Analysts note that it was reported on 13 November 2013 that the Euro, which had been enjoying a three day series of gains against the Yen, had begun to incur losses in trading. Analysts note that this falling off stems from a larger concern over a report that is expected to show slowed growth and lower manufacturing output across the monetary union.
Analysts believe that the Euro will likely struggle in trading over the coming days. Should the slowed growth prove to be evident, it may spur the European Central Bank to roll out additional actions, as was seen with their unexpected cuts to the interest rate.
British Retail Sales Report to be Issued Tomorrow
The report detailing the Retail Sales in the United Kingdom is expected to be released on 14 November 2013. At this time, many experts expect that the report will show a growth in the rate of sales during the month of October 2013.
Analysts note that the UK’s economy continues to show increased growth with housing prices on the rise. That said, some experts have expressed concerns that the rate of inflation may have dropped off of desired levels, which may lead the Bank of England to implement adjustments to the interest rate.
In the meantime, traders are advised to watch for upcoming employment data which should help to provide a clearer picture on the state of the British economy.