Goldman Sachs came up with the above statement that the Fed will only start to hike interest rates in 2015. Thats like 4 years away but that statement means a lot to me. It means that at the moment, the Fed is hell bent on quantitative easing (QE) or in other words will print as much money as possible to get the economy on track. The Fed believes that inflation is too low and they are targeting inflation at the 2% level. With more QE, the stock market will see this as a positive sign that the economy is being supported and will continue to rise, making those people who believes in the double dip a lil bit mum on that opinion.
The market is really hammering the US Dollar at the moment. However, I am now putting on my “trade with care” hat as I think the risk of a reversal is real and risk currencies like the Euro and Pound might just be heading for more headwinds as it continues up.
Bernanke however is also aware that there is inherent risks in carrying out QEs and this includes an undesired rise in inflation expectations and this affects the price of commodities. I am sure that you have taken notice of the current commodities rally. At the moment, we can expect more risk appetite in the markets with almost every other asset class going up except the US Dollar.
Success to your trading!
Singapore Forex Traders’ Blog