Binary Options News : December 19, 2013
Stocks Rise As Fed Announces $10 billion Tapering
Asian stocks rose overnight after the conclusion of the two day Federal Reserve meeting in the US yesterday saw Fed Res Chairman Ben Bernanke announce that the Fed is going to reduce its $85 billion a month asset purchase programme by $10 billion after economic data from the US recently gave support that the US economy is strong enough to start focusing on raising inflation and interest rates.
The Federal Reserve left the benchmark lending target unchanged at 0.0-0.25% but stated that it was reducing the amount of Treasury holdings and mortgage debt it purchases from banks monthly from $85 billion to $75 billion. The Fed did say however, that overall monetary policy, including the rock bottom interest rates, will stay flexible until the unemployment rate falls lower than the 6.5% figure which is regarded as the threshold where the Fed would rethink its policy.
The Fed forecast that the unemployment rate would drop to 6.3% next year from its current level of 7%. Data released in the US over the last month showed that the US economy increased at an annual rate of 2.8% in Q3, which was faster than expected, and an improvement on the 2.5% rate in Q2. An upturn in the housing stats this week has also been seen as giving enough confidence to outgoing Chairman Bernanke to start the tapering now instead of waiting till next year.
Asian stocks rose after the US Federal Reserve’s commitment to keep interest rates at their record low softened the effect of its decision to cut back on its stimulus programme. Japan’s Nikkei 225 index increased 1.76% and Australia’s ASX 200 added 2.01% with Hong Kong’s Hang Seng index rising 0.07% and the Chinese Shanghai Composite gaining 0.11%. The Fed Res announcement saw the Dow Jones Industrial Average close 1.62% higher, the S&P 500 index end up 1.66%, and the Nasdaq Composite index finish the US Session 1.15% higher.
The US Dollar made tentative gains in overnight trading after the dovish statements made after the Fed tapering decision the sparked appetite for risk-on trading that saw the USD into negative territory immediately after the Fed statement. The USD claw back some of its losses against the GBP – up 0.07% after yesterday’s surprise positive jobs and retail data from the UK. The USD/JPY was down 0.35% as investors are still supporting the Japanese Yen, whilst the USD gained 0.20% against the AUD and 0.27% against the CAD.
Gold and SIlver both tanked after the Fed tapering announcement, asa strengthened USD help push Gold down 1.68% and Silver plummeted 3.11% as the economic recovery is expected to strengthen the greenback further. Crude Oil rose 0.02%, shrugging off the strengthened USD as investors looked ahead to increased demand because of better global economic conditions. Natural Gas rose 1.37% as cold weather forecasts and supply concerns pushed the price to a 7 month high.
European trading is expected to be busy as investors there react to yesterday’s Fed decision, with Stocks and Indices both expected to open higher. Retail sales figures from the UK will keep the recently volatile GBP/USD in focus, whilst US Home Sales, Jobless data and Phili Manufacturing Index data should add to a busy and volatile day of trading.
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