TRIMBROKER (TRIMBROKER)
Currencies  |  March 07, 2013 12:58:58

Currency vigilantes attacking


iPoint.cz Dow Jones stock index ended trading yesterday on the new record number maximách and despite the decline in technology stocks in view of the enormous additional penalty for a company of Microsoft by the EU. Over the last 10 years the company received a fine from the EU in quantities of up to 2.26 billion euros.

Today we await the decision mainly European central banks. As the first row is BoE where the expected retention rates as well as the amount QE nezmenenej level, but approximately 30% of analysts expected extension QE. What is the reason for such a step?

Probably the biggest reason is economic growth, which the prospects are still extremely weak. Today it confirmed the British Chamber of Commerce BCC, which reduced the growth forecast for this year to 0.6% from 1.0%. This means that the central bank still wants to promote economic growth.

But economic growth in order to BoE? No. Its objective is inflation. And this goal BoE does not meet at all. Inflation is above the order of 2% since 2009 and averaged over the last 5 years has reached 3.3%. BoE ultra-loose monetary policy cause for the team that the economy threatens deflation. But she never came. The attached chart shows how much the Bank of England in inflation, failed.



Underlying inflation was an even more pronounced. According to the company give Tullet Prebon are due to high inflation, real income even in the last year by 6.3% lower than they were in 2007. The reason is the huge increase in prices of basic goods and services.


Where such developments and lets merchants? Flanges central bank controls the yield curve perfectly and limits the growth yields per dlhopisoch team that is their biggest kupcom, do not have the so-called bond vigilantes, well operators alert notifies cezpredaj bond to negatively impact the situation, nothing chance. In the forefront of the so-called receiving currency vigilantes.Movement is mien is left to the free market which is why we have seen a decrease due to QE the dollar since the beginning of the current crisis, or significant Rise yen or pound-expected due to new incentives. Monetary channel becomes the main expression of disagreement traders in monetary or fiscal policy. The exception is of course the euro zone, where the ECB is still not become an entity which would be unlimited buying bonds.

Rise pounds current can go further. Daily Financial Times even at night posted a message that British Prime Minister Cameron is planning a performance at the 20th budget March can change the course of the operation the British central bank BoE. They're talking about several possibilities as BoE put more time in reducing inflation to the target level of 2%, the grant for two mandates, BoE pattern Fed, I mean besides price stability behold jobs and in the end even speculate about a change of Targetinginflation on nominal GDP. Cameron wants to confirm its fiscal stance konzervativistu and help it has monetary activism. These changes would then apply to commence from July, when he comes to the BoE Carney. This means that britslá pound has open space, and to decrease the level of 1.40 may be far away target.

Author: John Benaki | TRIM Broker, as | Trading on exchanges TRIM Broker


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