27, August 2013

EUR/USD (a 4-hour chart)

EUR/USD (a 4-hour chart)

Almost every trader wants to know investor in the world when the Fed will begin to tighten the policy of easy money.

If the financial markets do not react in response to an alarm of the Fed there is a confusion in the discussions worldwide. However, the rates are very high. Changes in the Fed's policy will affect not only the U.S. markets. Investors in Europe, Asia and many other markets may eventually suffer losses if they are not prepared to the change. Future actions of the U.S. central bank appear to be partly responsible for the drop in value of the Indian rupee, along with the setbacks in other developing markets.

Fed Critics argue that the central bank must clarify its intentions to reduce market uncertainty and speculation about what may or may not happen.

If you were the head of the Federal Reserve, Ben Bernanke, and you would begin "narrowing" of the program of quantitative easing, which pushed interest rates and stock prices are up, you would scare investors who do not believe the economy is ready to stand on its own feet. You should monitor economic data to determine whether the economy will survive if the Fed starts to curtail its program.

Meanwhile, the economic symposium continues in Jackson Hole where three regional Fed presidents met discussing what is the best time to begin QE closing. In particular, the president of the Federal Reserve Bank of St. Louis James Bullard said that they should not be in a hurry with this, the head of the Federal Reserve Bank of San Francisco John Williams felt it appropriate "to reduce the purchase later this year”. The most radical views were said by the president of the Federal Reserve Bank of Atlanta Dennis Lockhart who supported the idea of cutting back QE as soon as the next month. Bernanke was not present at this symposium, so the market was not particularly responsive to disparate comments of the participants.