Asian markets are mixed this morning, over the disappointment of the Fed’s decision; markets had expected a larger stimulus package or new tools.
US Fed opted to extend its Maturity Extension Program (Operation Twist) for another six months, but there was no new large-scale asset purchase program (QE3).
UK jobless claim increased 8,100 to 1.6 mn in May 2012 against a forecast of 4,000 falls on a month on month basis.
Italy’s current account deficit narrowed to eur1.138 bn in April 2012 from eur4.849 bn in the same month last year.
China’s HSBC purchasing managers index for the manufacturing sector fell to a seven-month low of 48.1 in June 2012 from 48.4 in May 2012.
EURUSD (1.2672) had soared prior to the Fed announcement. News of a Greek coalition government had given investors a bit of risk on sentiment. After the Fed announcement, the euro weakened. Borrowing costs in Spain and Italy continue to rise, before the EU summit, coming soon.
The Great British Pound
GBPUSD (1.5680) The sterling gained on the weakened USD, but negative jobs data in the UK limited the movement. The sterling is expected to decline through today’s trading.
Asian –Pacific Currency
USDJPY (79.59) The USD gained some momentum in this morning’s session, as the Fed introduced only the bare minimum addition monetary easing but also reduced growth forecast and commented on the jobs situation. The USD had weakened on investors’ hopes of additional QE, so the USD gained after the announcement.
Gold (1603.05) fell in yesterday’s session but the fall took place before the FOMC statements and held after. Investors moved to risk assets after Greece announced the formation of a coalition government. Gold is expected to decline to its level prior to the heightened safe haven moves, when gold was holding in the upper 1560 price level.
Crude Oil (80.39) plummeted yesterday after the US Fed revised downward growth estimates for the US economy. With less demand and the EIA reporting exceptionally high inventories, there is suddenly glut of oil. Iran agreed to additonal talks but so far no headway has been made, but as long as they are at the table, the geopolitical aspects of oil prices remain depressed.