Often when heading into a weekend it’s possible to notice some element of caution entering into the market, as investors being to position themselves against the contingency of market-influencing news breaking when the markets are shut.
By Peter Martin
Saturday, October 25, 2014
This Friday is no different, and the caution is heightened by concerns about the spread of ebola and tension ahead of the key FOMC meeting next week.
The Fed committee convenes on Tuesday for its customary two-day meeting, with a policy announcement scheduled for Wednesday afternoon. Back at the September meeting, the Fed gave a heavy signal that it was eyeing the end of stimulus with this wording in the official statement that followed the meeting: ‘if incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will end its current program of asset purchases at its next meeting.’
Since then, James Bullard, the head of the St Louis Fed (and a non-voting member of the FOMC this year), rocked the boat a little by saying he thought the committee should act according to its familiar ‘asset purchases are not on a preset course’ mantra and postpone the end of stimulus in response to recent economic developments, such as tame inflation in the US, persistently low inflation and growth in Europe, not to mention last week’s steep slides in the global stock markets. Despite Mr Bullard’s comments, the Fed is still expected to announce an end to its program of asset purchases next week. Pre-FOMC caution, along with yesterday’s unsettling news of a confirmed Ebola case in New York City, have prompted some safe-haven buying today, lifting the Japanese yen and denting the dollar’s gains for the week.
By mid-afternoon in New York, USD/JPY was down 0.2% at 108.05, while USD/CHF slid 0.23% to 0.9520 and GBP/USD rose 0.36% to 1.6087.
The euro was boosted by indications ahead of the ECB’s assessment of the health of Eurozone bank that a large majority will pass. Bloomberg News reported that a draft communique of the health check shows 105 banks are set to pass the review, with 25 lenders failing. The official results are set to be published on Sunday. The ECB cautioned against speculating on the outcome in advance, saying in a statement that ‘any inferences drawn as to the final outcome of the exercise would be highly speculative until the results are final.’ The euro gained 0.16% against the dollar, climbing to a rate of 1.2667.
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