Investing.com - Financial Markets Worldwide

Major Central Banks Now Engaged In Forward Guidance

ByDanske Markets
Published 07/08/2013, 03:17 AM
Updated 05/14/2017, 06:45 AM
AA
1.38%

Focus today will be on markets digesting Friday's strong payrolls out of the U.S. In light of what this means for Fed tapering its quantitative easing (QE) program. A first Fed hike is now priced by December 2014, which we think is somewhat early considering that the Fed has signaled it intends to move slowly. Indeed, given the limited liquidity in U.S. markets late last week due to the July 4th. holiday, there is a risk the Treasuries sell-off on payrolls may be corrected somewhat today and we could see US rates decline a little.

With major central banks now engaged in forward guidance, we are currently in an environment where markets need to price a data-dependent Fed exit contrasting with a time-dependent one from the ECB. The Fed should be the 'easy' one here, given its focus on labour-market developments and longer history of using forward guidance. The ECB is somewhat more tricky as markets will gradually have to deduce what Draghi means by low rates for an 'extended period'. This will likely be an overriding theme in the coming months with the ECB chairman steering markets through verbal communication - watch out for Draghi speaking this afternoon.

Some uncertainty in Europe remains in place ahead of today's Eurogroup meeting. Greece's negotiations with the troika over the country's loan tranche failed over the week and talks will resume today. The Portuguese government did a cabinet re-shuffle to end last week's crisis, but speculation is already rising that this may prove a temporary calm. Watch out for those peripheral spreads today for any signs the euro-debt crisis is smouldering again.

The earnings season is set to start with Alcoa reporting for Q2 today.

To Read the Entire Report Please Click on the pdf File Below.

Latest comments

Loading next article…
Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.