BOSSA.CZ (BOSSA.CZ)
Markets  |  August 16, 2012 17:42:16

Financial markets have recently become a bit "tricky" (August 17, 2012)


The development of prices of some financial instruments in recent years may seem a bit messy and not so relevant economic fundamentals. For example, if poor economic data from China lead to the strengthening of the local stock market index, or when bad data from Europe caused by the strengthening of the euro, so a lack of logical reasoning.

This is due to the fact that the publication of economic data, investors anticipate future steps ahead of government officials. This means that the bad data from China expect further monetary easing by the Chinese central bank. This would subsequently lead to the strengthening of the Chinese stock market, and investors and, consequently, the financial markets react to the various matters in advance of bad data and a straight purchase.

The same situation occurs in the field of EURUSD. Bad data from the European region led investors to believe that the Fed will come under more pressure to protect the U.S. economy from the contagion spreading from Europe. These expectations then cause the weakening dollar and strengthening euro. And so it is often a question of which events in the final prevail. If the economic data very revealing about the state of the economy or expectations of economists about future actions of policy makers. Current situation in the markets is tricky and can sometimes catch us.

This confusing situation will last at least until the end of August, when the economic circumstances to be clarified. 31st August begins 2-day economic symposium in Jackson Hole, USA. It involves leading American economists, central bankers, Academics and financiers. It was after this major economic conference might finally clear economic plans Fed in the future of U.S. monetary policy.

The good news is that by then at least read the situation on the American battlefield. Poor economic data could theoretically should lead to a weakening dollar. Even if our considerations to the possible involvement of the Fed, as bad economic numbers mean potential monetary easing, then we will reach the same conclusion, and the weaker dollar. The same rule applies in the case of positive economic news. Good news lead to a strengthening dollar. In the event that also engage in reflection of the Fed and other QE does not occur again and the dollar strengthens.

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