Fed rubbishes QE3 talk

The Opening Bell: Where currencies start on Thursday, February 16, 2012

Currencies

The Opening Bell: Where currencies start on Thursday, February 16, 2012

16th Feb 12, 9:13am by Dan Bell

By Dan Bell

The NZD/USD opens at 0.8340 this morning after hitting a high of 0.8419 overnight.

The NZD rallied after yesterdays much stronger than expected Retail Sales and continued to trend up with other risk assets on news that Greeks opposition leader had agreed to provide a written pledge to follow through on austerity measures and comments from China that they will continue to support the Euro zone through their debt crisis.

Sentiment turned negative overnight after news that Euro zone leaders are thinking about delaying the bailout to Greece until their elections in April.

Global equity markets are weaker with the Dow Jones Index down 0.62%.

The US Fed’s FOMC minutes were released this morning with little surprises.

In a speech overnight, one of the Federal Reserve’s voting members Richard Fisher said that QE3 is a ‘fantasy of Wall Street’ and is ‘not going to happen’. The prospect of another round of quantitative easing from the US has been a key driver of US Dollar weakness lately.

The NZD is stronger against most major cross rates and opens at 0.7795 AUD, 006380 EUR, 0.5310 GBP and 65.20 JPY.

From NZ today- we have already had Fonterra auction results which saw prices down 3% this morning. We also get Business PMI and Consumer Confidence numbers.

From Australia, Employment numbers are released at 1:30pm NZT.

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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here

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5 Comments

by skudiv | 16th Feb 12, 11:21am 1329344518

The Committee also stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability. A few members observed that, in their judgment, current and prospective economic conditions—including elevated unemployment and inflation at or below the Committee’s objective—could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run.

In contrast, one member judged that maintaining the current degree of policy accommodation beyond the near term would likely be inappropriate; that member anticipated that a preemptive tightening of monetary policy would be necessary before the end of 2014 to keep inflation close to 2 percent

by dazz | 16th Feb 12, 7:31pm 1329373881

NZ$ has fallen a lot since midday against most currencies. I cant pick whats driving it - any suggestions?

by OMG | 16th Feb 12, 7:47pm 1329374860

I'd say its Iran - the tension over nuclear issues is increasing. Oil could go to $300 if the Straits of Hormuz are closed or insurance rates for tankers go ballistic/tankers withdraw from shipping ME oil. Iran is threatening to stop supplying Greece, Spain etc. The West is putting ever more obstacles in the way of trading/paying for Iranian oil. This is happening at a time when supply is very tight.

Negative developments would leave NZ very exposed.

by steven | 16th Feb 12, 8:15pm 1329376546

Only $300? I think it more likely that it would go way way higher as it becomes unavailable...as we ration by price....Ive seen $500, $600 suggested....

15mbpd through there, oil went up $40? just over libya and thats only 1.8mbpd....2% v 20%.....insane comes to mind, though this piece seems rather mundane...cant see it being that easy...

http://www.washingtonpost.com/blogs/ezra-klein/post/how-the-world-would…

Trouble is a) even if we dont collapse into riots and mayhem as our food isnt on supermarket shelves b) our [global ] economy will plunge as output drops away....job layoffs.....etc etc....the Great Depression would look like a kinder garden party....I dont think there is a worse possible scenario...

Also I think [most] insurance doesnt cover acts of war....not so sure where you would get the crews from as well.....military crews? not aware where they would get that many from, but its possible.

regards

by OMG | 16th Feb 12, 8:25pm 1329377155

I've already stocked up on canned and dried food a week or so ago,as whenever there is a crisis of some sort here in HK, eg signal 8 typhoon, the supermarket shelves are cleaned out before you blink an eye. The $300 figure is one quoted on Bloomberg an hour or so ago. The China govt has pledged to keep HK supplied with food come what may, so that is a plus, however having just witnessed 10's of thousands of people qeueing up for commemorative banknotes from the BOC I am well aware of mob pyschology.