The Fed has kept its buying bond plan as it is but it can change its pace of buying in it as the economy needs and that what we have ended to from the Fed's US assessment which has not come with remarked changes referring to that the weak growing pace can not support the labor or give stability to the housing market sufficiently as required which can underpin the downward of prices from another side which help the Fed to maintain the interest rate unchanged building on its buying bonds plans not influenced yet by the potential inflation risks but Mr. Hoening the Fed's governor of Kansas who voted against this decision appreciating these inflation upside risks over the long term.
The US stocks have lost a lot of its gains again by the end of the session after the release of the Fed's assessment which has disappointed the speculations of adding more funds to the 600B$ buying assets plans keeping these plans volume unchanged lowering the market discounting these probabilities.
The treasuries yields have gone up markedly in the recent period since the previous meeting of the 3rd of November when the 2 years treasuries yields were around .38% while they are now about .66% which refers to an increasing of the cost of borrowing in US despite the Fed's injected funds into these debts which should lower its returns but the market is still expecting further easing steps from the Fed and longer period of keeping the tax cuts in US which can widen the US budget deficit hiking the treasuries yields increasing the need of selling these treasuries notes while the greenback seems getting benefits from the rising of these borrowing costs which can be triggered by the rising of the notes benchmarks and this was obvious to the market today after the Fed had announced that it will not buy more than what has been planed which can support this link currently adding strength to the greenback which dragged the single currency below 1.335 while it was trading above 1.34 before the Fed's decision triggering more selling of the notes. It is convincing reasonable story and By God's Will, it can live more than this containing the market sentiment getting use of the Euro owes because of the debt crisis which can exacerbate by no reached deal from the European leaders meeting this week who are actually looking in split with Germany calling for no more added funds over the near term and cooling of the current package with the IMF and the hopes for adding more funds to this package encouraging Spain and Portugal to take a share from it which can procedural lead Germany to add more funds supporting these debt ailing economies which are looking in need of long period to cover its financial position as we have seen Greece last week having extension of its loans maturity to pay them back. That's beside the political position inside Ireland which is still complicated and unstable after the decision of having the aid of the bailing out package which is offered by the European countries and mainly by Germany and the IMF which is underpinned by US which forces them to take further austerity financial measures including tightening of their spending and hiking of the taxes which can pass hardly this week with strong criticizing of these measures which should effect negatively as well on the growth pace of the country which was growing by more than 10% in the 1990s supported by these low taxes which attracted the investments to it.
The gold eased back also from above 1400$ negatively impacted by the energy and commodities prices which have gone down by no more added funds to the US quantitive easing policy Fed's decision after they have been underpinned by the probabilities of having new funds especially after the disappointing release of November US labor report which has shown rising of the unemployment rate to 9.8% from 9.6% in October and lower than the market expectations non-farm payroll added just 39k while the market was waiting for about 150k which can move the Fed to take further easing steps depreciating the greenback increasing the prices of the energy and commodities globally while the US economy is still in need to fight the deflation pressure forcing other countries and especially the Asian to curb the investment spending and cooling their economies as we see in Korea and China which increased its banks reserve requirements six times this year by 0.5 percent for curbing the inflation upside risks as the most preferred way to the Chinese until now than hiking the interest rate or letting the Yuan to appreciate further criticizing this US quantitive easing policy of US which is causing a devaluation of the greenback hurting their economic growth and their exports and in the same time helping to tightening the US trade deficit which came down in October to 38.7b$ from 44.6b$ in September while the market was waiting for 44.8b$ and as long as the US labor market is still in need of supporting, there will be no clear end of this easing policy and tax cuts in US which can be kept longer this week since declaring them during Bush's presidency in another way of easing can hurt the US budget and treasuries prices driving the US treasury yields up as we have seen by the end of last week and after the Fed's decision.
Best wishes
FX Consultant
Walid Salah El Din
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