Let’s Twist Again

Currencies Direct June 20th 2012 - 2 minute read

Focus
for today is on the US FOMC meeting later tonight and the question is will they
or wont they “twist again” or expand their QE programme.  A survey of 64
economists by Bloomberg showed that 37 out of 64 expect the Fed to announce an
extension of Operation Twist tonight compared to 19 who think not.  If the
Fed do go down the road of more QE or “Twist 2” then expect a bounce into risk
appetite with Gold and commodities the big winners and gains in the CAD and the
AUD expected, on the flipside expect a weaker USD.

Back to Europe and Greece’s pro-European parties are said
to be on their final stretch in forming a coalition government as EU and IMF
officials were expected to visit Athens for talks on resuming payment of the
country’s bail out funding.   Greece urgently needs €1bn that was
held back from a €5.2bn payment in May, amid EU anger at the inconclusive first
election on May 6. That cash is expected to be paid before the end of June when
the new coalition government is in place. At the G20 summit there was clear
evidence of a desire to move to closer integration to forge a sustainable
Europe, a statement noted that “The adoption of the Fiscal Compact and its on-going
implementation, together with growth-enhancing policies and structural reform
and financial stability measures, are important steps towards greater fiscal
and economic integration that lead to sustainable borrowing costs”. 
Italian PM Monti added that Euro heads are to make crisis decisions in the next
10 days and so the market is expecting progress by or at the EU summit at the
end of the month.

 

Yesterday inflation fell again in the UK with UK May CPI
coming in at -0.1% month on month, good news for the Bank of England as this
aligns with their forecasts and potentially provides more scope for further QE
in the UK.  Later today we have the MPC minutes and unemployment data from
the UK to look forward to and interest will focus on any move towards QE
evident from the minutes of the last meeting, if so we could see a dip in the
pound.


 

Report by Phil
Mchugh

Written by
Currencies Direct

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