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Market Essentials - Central Bank Speculation

Last updated 8/26/2012 7:34 PM EST (GMT -5) 0 Comments - Add your comment

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Andrew Taylor

Market Strategist, GFT

Follow @ATaylor_GFT

US Equity markets on Friday battled against the week’s downward theme to post good gains thanks to refreshed views that the US and European Central Banks are moving closer to their much talked about stimulus injections ahead of this week’s Jackson Hole meeting.

US Watch

A letter by Fed Chairman Bernanke answering questions posed by Congressman Issa, reaffirmed the Feds view that ‘there is scope to ease financial conditions and strengthen the recovery’. Although there was nothing new to the release, just the fact that it surfaced gave easing supporters reason to buy up the markets that would benefit most from QE3, equities and commodities.

EU Watch

Chatter that the ECB is looking at specifics of how it will look to implement its bond buying program has also helped shape the markets view that the operation is a done deal but with hurdles still to be overcome, this may take more time than what the market is willing to give them. The discussions have centred on the ECB applying yield-band targets which is aimed to protect against market players using for speculative gain.

AU/Asia Watch

Today China will release its Industrial Profits figures (prev: -2.2%) as well as its CB Leading Economic Index for July. Both of these second tier data pieces will be watched more so to see if the case for further stimulus by the PBoC is strengthened, of which, we believe they will.

The month of September will see key scheduled events take place that have the potential to determine longer term trends. This will see participants looking for early clues in setting themselves ahead of the pack, so expect to see quite a few false starts and skittish moves, however, with Europe returning from its summer break, the increase to liquidity levels should help stabilise conditions.

Outlook

The Asian session will see a positive start as Fridays gains in the US are accounted for. With not much on the global data card and no new revelations to change current macro themes, directions will continue to be dictated by speculation surrounding the likelihood of Central Bank action within the world’s three largest economies. The Asian markets should test higher initially but buying interest will wane and drift lower through the course of the day ahead of early Europe.

For more intraday analysis and trade ideas, follow me on twitter @ATaylor_GFT

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About The Author

Andrew Taylor's financial markets career started in 1991 in the interbank FX market,where he worked for one of the largest banks in Australia. Andrew then went on to trade on behalf of some of the biggest global banks, working across five of the world's major financial hubs: Sydney, New York, Singapore, Auckland, and Tokyo.

His more than 20 years of experience spans market borders and asset classes, covering global equities, commodities, options and futures. Andrew's wealth of trading experience and ability to communicate with traders of all levels has put him in demand as a first point of contact for clients and the media alike when seeking information and guidance.