When Bernanke spoke on 4-different occasion’s last week market for a moment though that his is the final word. Everyone forgot that it’s not the FED Chairman alone that takes decision on interest rate. Instead there are 12- voting members that take decision on interest rate.
Initially Fed Chairman’s speech gave impression that QE is coming, but in his later 3 speeches he became cautious, chose his words and avoided talking much on his monetary policy stance. Then market interpretation was that Fed could still go for QE, as reducing unemployment is the top priority, which is not possible without growth, but inflation is the worrisome factor form Fed’s continuation of its long term-easing policy.
But Tuesday’s Fed minutes had different story to tell about their March meeting, as majority of the members were in no mood for additional easing, which also means no more quantitative easing (QE) for the time being. Out of 12, only 2-members favored QE.
Report indicated that Fed members are not too worried about inflation getting out of hands. They were not specific to maintaining easy policy until 2014 and are willing to make a change if necessary.
However, all is not over as yet, this minute only reflects sentiment until March, which is one out of eight meetings. Next FOMC is due on April 25 and Operation Twist expires in June. Bernanke’s worry about jobs and growth was not false, so the market will be watching US economic data more closely and will be monitoring that if the current economic recovery is sustainable and jobs number continues to improve or will be short lived. If the economic data deteriorates then be prepared for the second round of Operation Twist that expires In June or for more FED bond purchase.
Euro @= 1.3198 = The fall is huge and we could see another 50 pip drop, but I would like to be cautious around 1.3140-50 zones for a potential move towards 1.3250’s. Ideal trading strategy would be to pick the bottom or top with 40 pip Stops Loss.
GBP @ = 1.5888= I will not hesitate to buy Cable around 1.5850 with 40 pip Stop loss as GBP could potentially make a move towards 1.5930-40 level.
GOLD @ = $ 1644= Gold fell almost 2 pct after the release of FED’s minute that did not favor QE and easy policy due to stable US economy. There is more bad news for gold as RBI tightens banks reporting structure on gold import, which means that India seriously wants to reduce its gold import bill to counter its current account deficit and Tamil Naidu jewelers announcing to close shops for another week in protest could provide further blow to the metal.
Prefer selling gold around $ 1648. Choose your stops as $ 1655 is the level to watch which should not break for a move to $ 1635 or $ 1630.
GbP RallY tO FizzLE OuT, GoLD iS uP - ApriL 03.