Fed extends Twist, no QE3

The buck firmed after the FOMC revised lower its outlook for the economy and disappointed investors that were looking for another round of asset purchases. The Fed did extend its Operation Twist program through the end of the year with $267B of Treasuries to be swapped by the end of 2012 with the intent of pushing down longer term borrowing costs. At the following press conference, Chairman Ben Bernanke left the door open for QE3 as he said that the Fed would consider further asset purchases. He highlighted the fact that safe haven flows have been pushing down interest rates and added that the Fed “can lower interest rates more”. Treasury yields1 are mostly higher today with the exception of the long term 30-year yield which is currently lower by 2.2bps.

The projections released by Fed Presidents and Governors showed a reduction in growth and inflation forecasts along with higher expected unemployment this year. 2012 GDP growth projections were trimmed to 1.9-2.4% from the prior 2.4-2.9% forecast in April, PCE inflation was reduced to 1.2-1.7% from the prior 1.9-2.0% and the unemployment rate for this year is forecasted to be between 8.0-8.2% vs. the prior 7.8-8.0%. The FOMC remained accommodative and reiterated numerous times that it is prepared to act “as appropriate”.

While the main focus was on the Fed today, it was not the only central bank which announced policy with the Norges Bank earlier this morning keeping rates on hold at 1.50%. The bank revised higher CPI estimates saying that the GDP outlook suggests CPI will drift higher. It went on to say that rates will start to rise gradually after the end of 2012. The Norwegian Krone outperformed the G10 currencies as it was the only G10 currency which traded higher against the USD today. USD/NOK fell to test the 55-day SMA which is currently around 5.89 and sees the convergence of the 100- and 200-day SMA’s around the 5.80 level below that.

U.S. equities finished the day lower after choppy trading amid the FOMC meeting. The Dow Jones Industrial Average1 finished the day lower by about -0.10% and the S&P 5001 slumped by around -0.17% to close out the session. Commodities fell on the back of a stronger dollar with the precious metals gold and silver currently lower by about -0.81% and -1.30% respectively. WTI crude1 is down by -2.71% at time of writing after weekly U.S. crude oil inventories unexpectedly rose to +2861k barrels while the market was anticipating a decline of -1300k.

New Zealand 1Q GDP figures are due out shortly and are expected to show growth pick up to 0.4% q/q from the prior 0.3%. Japan will release its weekly securities investment figures and May final machine tool orders while China sees the June unofficial HSBC flash manufacturing PMI. In Australia, RBA foreign exchange transaction data for May are due.

Источник: Forex.com

21.06.2012