Week in FX Americas – “To Taper Or Not To Taper” That is the Question

Global sentiment remains dominated by the speculation over the timeline of the Fed’s move to reduce its bond-buying program. This week’s U.S. initial jobless claims fell to a multi-year low and other data showed the American consumer-price index rose for a third straight month in July. However, despite the improving jobs picture, the labor force participation rate in July was 63.4% — reportedly the lowest it has been since 1979. Regardless, Fed officials have been saying that they require signs of higher inflation; coupled with other encouraging indicators, before a decision to reduce any part of the current $85-billion monthly bond-buying program is made.

For the sixth straight week, the amount of US Treasury’s owned by foreign accounts held at the Fed fell. The $5.2b drop brings the total decline in past 10-weeks to a little over +$58b. Is a falling bond market meaning that investors are losing confidence in the US? “Custodial holding at the Fed tend to track how Asian currencies are performing. When these strengthened amid growing Fed stimulus, dollars were bought to cap the strength, then used to invest in US Treasury’s.” Now that the Emerging Currencies are weakening the market is doing the exact opposite.

Anxiety over the Fed tapering next month continues to weigh on bond prices. US ten are ending the week straddling their highest yields (+2.81%). If the Fed does table “taper” in September, how much will they reduce their monthly $85b purchases by? At this stage it seems it will take a dismal August NFP print to derail a stimulus reduction.

• Oil Rises as Supply and Egypt Drive Price Upwards
• Canada Real Estate Continues to Rise Fears of Bubble Bursting Increase
• Paulson’s Exit May Signal Bullish Return For Gold
• A Rapid Rise in Yields may make the Fed Nervous
• “Fear Index” Climbing But Remain Below Panic level
• Fed-Tapering Speculation sees U.S. Dollar Decline From One-Week High
• Continued Talk on Fed Taper sees China’s Treasury Holdings Fall
• U.S. Unemployment Benefit Claims hit 6 Year Low
• Rising Interest Rates Likely to Affect Volatility
• US Inflation Rises Moves Close to Fed Target in July
• US Jobless Claims Decline to Lowest Level In six-years
• UK Retail Sales Grows by 1.1 Percent in July
• US Jobless Claims Drop to Six Year Low
• Fed QE Taper to be taken in Market Stride
• Paulson Cuts Gold Holdings by 50%
• QE Uncertainty is Making U.S. Stocks Nervous
• U.S. Dollar Remains Higher on QE Taper Odds
• US Producer Prices Flat Point to Little Inflationary Pressure
• Fed May Slow QE at Next Three Meetings
• U.S. Sales Rose as Companies Keep Lean Inventories
• Oil Rises on Weak US Supply Speculation
• Mexico Energy Reform Proposal to Open Oil Sector to Private Investment
• US Retail Sales Rise in July
• Mexico Proposing To Lift Oil Industry Ban
• Dovish Talk may be More Powerful than QE
• Hedge Funds Retreat From Gold Fearing Fed Tapering

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