Here's my summary of the key news overnight in 90 seconds at 9 am, including news US stocks rose 0.6% overnight and the Eurostoxx 50 index rose 1.7% as investors placed their bets on the European Central Bank convincing Germany to allow it to buy Spanish bonds.
US stocks also rose on growing expectations of a significant easing from the US Federal Reserve on September 13 when its policy making committee (FOMC) next meets. US stocks have risen 11% so far this year on growing expectations of fresh money printing and monetary stimulus in Europe and the United States. See more here at Reuters.
Boston Federal Reserve President Eric Rosengren said in a New York Times interview the Federal Reserve should make unlimited purchases of bonds until it was clear unemployment was falling. Rosengren is not a voting member of the FOMC, but his comments are the strongest yet from the camp within the Federal Reserve system in favour of unlimited money printing to boost the world's largest economy. Previously the Fed has set limits on its first two rounds of money printing to buy bonds, known as Quantitative easing.
Rosengren also pointed out that such unlimited money printing would weaken the US dollar, which would boost America's export sector.
Meanwhile, surprisingly, the New Zealand dollar fell despite the strength on stock markets. Normally the New Zealand dollar rises and falls in tune with appetites for riskier assets such as stocks and commodities, but overnight an interview from Prime Minister John Key with Bloomberg helped drag it down to 81.5 USc and under 66 euro cents.
Key warned against making one-way bets on the New Zealand dollar's rise and pointed out the strong exchange rate gave the Reserve Bank room to cut interest rates.
Here's his comments as reported by Bloomberg:
At some point, currency appreciation would make the economy “splutter and stutter and probably stop,” he said in Christchurch. At the same time, “a rising exchange rate takes pressure off the Reserve Bank. Base rates are still much higher than they are generally around the world -- 2.5 percent. There are options, so let’s see.”
The prime minister signaled that the onus on aiding New Zealand’s growth will remain on the central bank as his administration seeks to return the budget to balance. “The government’s preferred position is not to be stimulatory,” and the central bank has “room to move if they want to,” he said.
See more discussion on the potential for Reserve Bank intervention here in my weekly currencies review with Dan Bell and Alex Tarrant's article on the Reserve Bank's profits from previous interventions.
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