BOE Voted Unanimously To Keep Rates Unchanged, First Time Since May 2010

The BOE minutes for the August meeting turned out to be more dovish than expected as 2 hawks, Spencer Dale and Martin Weale, stopped pushing for a rate hike, making the decision to hold the Bank Rate unchanged at 0.5% unanimous for the first time since May 2010. Adam Posen continued to favor expanding the asset-buying program by +50B pound to 250B pounds. The pound slid after the minutes as it's increasingly likely that the central bank will adopt further easing.

Policymakers acknowledged the slowdown in economic activities with the greatest downside risk coming from the Eurozone. As mentioned in the minutes, 'evidence of slowing activity, and more particularly, concerns about fiscal policy in the U.S. and the substantial challenges faced by the euro area, had resulted in stressed conditions in financial markets' and 'news over the month had generally reinforced the weak tone of indicators of global activity growth over the past few months'. Indeed, the BOE revised lower the growth forecasts for the UK in light of the current headwind.

It's rather unexpected that the Committee voted unanimously for the first time in more than a year to keep interest rates unchanged. Spencer Dale and Martin Weale, who had favored a rate hike of +25 bps, voted to maintain the Bank Rate at 0.5%. According to the minutes, the 2 members 'remained particularly concerned about risks to the upside associated with a sustained period of above-target inflation'. However, recent developments had 'weakened' the case of tightening.

As far as the asset-buying program is concerned, the minutes unveiled that some members 'considered whether there was a case for increasing' the size. However, the conclusion was that there 'was not yet strong enough' evidence to support the move. Policymakers stated that further increase in the size might 'become warranted were some of the downside risks to materialize'. Adam Posen retained the view that 'the balance of risks to inflation continued to warrant an immediate expansion' of asset purchases. Posen believed that the weak pattern of demand domestically and overseas had evolved broadly as expected…There remained a significant margin of spare capacity' and it's like that 'inflation would fall below the target in the medium-term'.

Forex Pips Indicators.avi

http://www.fishingforexpips.com/ Present:
Forex pips indicators have a major speculative role to play in the foreign exchange market. They refer to the minute increments of a given currency. PIP is an acronym for "percentage in point" and forex rates are expressed up to 4 pips or 4 decimal places.

View the original article here

Central Bank Forecasts: BOJ's Stance To Remain Accommodative After The New PM

We don't expect the monetary policy in Japan will change after the new Prime Minister on board. With economic growth remaining sluggish and deflation still a threat, the BOJ will leave the policy rate at virtually 0% at least until 2012. The central bank will also maintain the asset-purchase program and may expand the scope of assets if necessary. With regard to yen's strength, we believe the government has not given up intervention though the impacts so far have not been significant.

Yoshihiko Noda has been elected as Japan's new Prime Minister. The former Finance Minister will be the 6th PM in 5 years. It is expected that Noda will continue the policies adopted when he served as the Finance Minister. Therefore, his succession would probably give the market a sense of stability. There are a series of issues that Noda has to deal with as the new PM: reconstruction works after the Great East Japan Earthquake in March, the change of energy policy after the nuclear crisis that followed the earthquake and tsunami, the recovery of Japanese economic growth and the control of excessive yen appreciation. As far as economic policies are concerns, we believe the mix of fiscal and monetary policies will remain accommodative in the new regime. Being described as a fiscal conservative, Noda suggested doubling the 5% sales tax to fund disaster reconstruction. However, he has toned down this proposal recently. BOJ's independence will unlikely improve and monetary policies will remain accommodative in coming years.

We expect the policy rate, the uncollateralized overnight call rate, will stay at around 0-0.1% through 2012 as Japan's economy has remained fragile and the risk of deflation is still high. The preliminary estimate showed that Japan's economy contracted -0.3% q/q in 2Q11. While it was better than expected, it was mainly helped by government spending and household consumption actually contracted for the 3rd consecutive quarter. Deflation remained a concern in Japan. Although the nationwide CPI (excluding perishables) rose +0.1% q/q in July while the reading excluding food and energy dipped -0.5%, it remained well-below BOJ's target inflation of +1% y/y.

Since 2008, the BOJ has been expanding easing actions, hoping to revive the economy and curb yen's appreciation. In December 2009, the BOJ cut the policy rate from 0.3% to 0.1%. At the same time, it increased the size of outright purchases of JGBs from 14.4 trillion yen to 16.8 trillion yen as well as expanded the range of JGBs accepted in outright purchases. In 2009, it further increased the size of outright purchases of JGBs to 21.6 trillion yen from 16.8 trillion yen in March and introduced 3-month fixed-rated funding operations in December. In August 2010, the BOJ expanded the scope of fixed-rate operations to 6 months. In October, the policy rate was lowered to 0-0.1%. The central bank at the same time established the asset purchase program to buy 2-year JGBs, commercial papers, J-Reits and other assets. The program was expanded twice (March and August) so far this year to stimulate the economy and to curb yen's strength.

Strength in Japanese yen has been a headache for policymakers as it hurts the country's export-oriented economy. The government has adopted intervention for several times but the impacts have been temporary. Last week, the government introduced a new loan facility worth of $100B to encourage domestic companies to invest overseas. The scheme, which will be in effect for 1 year, is expected to weaken the yen as Japanese companies exchange yen for foreign currency to invest overseas. While the measures may help boost the economy and send the currency lower, the impacts are limited. In his capacity as the Finance Minister, Noda had taken firm steps to intervene against appreciation in Japanese yen. He said last month that he would take 'bold' action to curb yen's appreciation and intervention 'is a measure of last resort -- it would be meaningless if it were not a surprise'. Therefore, we believe currency intervention is still on the government's agenda with Noda as the new PM.

A Beginners Guide Simple Forex Trading System.avi

Forex is a global and decentralized financial market for trading currency. Basically it trades in different types of currency and in doing so determines the relative value of one currency over another. For example Mr A trader in America trades $10,000 and exchanges it for Euro's.

For more information go to http://www.fishingforexpips.com/

View the original article here

BoC Leaves Overnight Rate Unchanged, Removes Tightening Rhetoric

As expected, the BOC decided to leave the overnight rate unchanged at 1% and correspondingly, Bank Rate and the deposit rate at 1.25% and 0.75% respectively. The accompanying statement delivered a less hawkish tone than before. As global economic has deteriorated in recent weeks and total CPI inflation will continue to moderate as temporary factors unwind, the central bank believed the need to withdraw monetary policy stimulus has 'diminished'.

The BOC listed a series of events that has caused the recent instability in the economy and financial markets. The European sovereign debt crisis has intensified and 'significant initiatives by European authorities' are needed to resolve the 'acute fiscal and financial strains'. Economic indicators suggested the risk of US recession heightened and fiscal stimulus in the country will 'soon turn into material fiscal drag'. Growth in emerging markets will inevitably be dragged down by weakness in advanced economies.

In Canada, growth eased in 2Q11 as driven by temporary factors and the central bank remained confident that growth will resume in the second half. However, persistent strength of the Canadian dollar will affect net exports which are 'expected to remain a major source of weakness, reflecting more modest global demand and ongoing competitiveness challenges'. Concerning inflation, The BOC expected inflation will ease as high food and energy prices moderate. Yet, the central bank at the same time warned that while 'commodity prices have declined owing to diminished global growth prospects, they remain relatively high'.

Concerning monetary policy, the central bank removed the reference that 'to the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn'. Instead, it stated 'in light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished'. The meeting outcome was largely in line with our expectation. We retain our view that the BOC will leave the policy rate unchanged at least until mid-2012.