Archives of “quantitative easing” tag

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Trade the strong against the weak

  
Analysis, Forex
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NZD

One of the key trading maxims in the FX world is pairing strength against weakness.If you need a refresher on that concept please do check that out here. So, yesterday we had the RBNZ rate meeting which has given us a weak NZD bias. Going into the event a client was asking me what I was going to do before the RBNZ rate meeting. The answer was simple, wait. Waiting to for the central bank to show its hand. The RBNZ has now done that and that is what gives us a bearish bias.

Reasons for the RBNZ’s weakness

The RBNZ has launched a set of bearish policies extending its asset purchases programme and showing openness to negative interest rates. They increased their quantitative easing (LSAP) programme to $100bn and extended its length from 12 to 22 months. Furthermore, the RBNZ expressed a preference for a lower or negative OCR and a ‘Funding for Lending Programme’, while leaving all options on the table.

So, we now have a short to medium term NZD bearish bias, look to pair it with currencies as they show strength. Yesterday’s strong AUD employment data make AUDNZD longs appealing on pull backs.

NZD

The never ending QE story

  
  Analysis
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Via Bloomberg

Via Bloomberg  
I came across an interesting Bloomberg piece when the Market’s Live team published a piece on the Market’s Live blog making a case for QE continuing indefinitely.  The rationale for the view is that the world’s major banks are not buying debt quickly enough leaving  ~$1 trillion of new sovereign bonds for buyers in the months ahead. This mean that the Fed, ECB and BoE will need to increase the pace of purchases in order to maintain the present low bond yield levels.
The devilish deal means that huge COVID-19 support packages is met with a seemingly virtually unlimited amount of bond purchases to keep borrowing costs down.
The Market’s Live team make a greta point. There is no way to go back now we have started down this QE road. Many people now who take mortgages will have no memory of high interest rates and how crippling they can be. Many new mortgages will be based on these ultra low rates which means that the central banks must keep adding to their QE programs and keep the borrowing costs down. Failure to do so will just cripple an economy now that is dependent on low borrowing costs
Gold and silver set to shine
This environment is perfect for both gold and silver to shine in. With central banks committed to do ‘whatever it takes’ to cushion the COVID-19 blow and low yields for the medium term future expect the precious metals to keep moving higher and look for pullbacks for buying.
$1855 looks like an area where we can expect pullback buyers in gold and $21 an area to expect pullback buyers in silver.

The Fed Flashes the Nuclear QE

  
Analysis, Economy, Education
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Of ten people who hear the same story or speech, each one might understand it differently. Perhaps, only one of them will understand it correctly. Bernanke acknowledged that the US-economy faces an “unusually uncertain time,” but if necessary, he hinted the central bank would resort to “Quantitative Easing,” (QE), or printing vast quantities of US-dollars, in order to prevent a deflationary spiral.

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