As the BoJ only claimed it would continue its quantitative easing until mid 2016, investors are now speculating whether the central bank extends the easing or not.
In this article, we discuss the impact of the QE extension/expansion to USD/JPY to clarify if the BoJ has an effective means to affect the currency market to support the inflation. We first review the chart of the monetary base ratio:
Continue reading 2015-2016: What will happen to USD/JPY when the BoJ expands the QE further?
The GDP of the US grew by 2.32% in the 2nd quarter of 2015, weakened from 2.88% in the same quarter of the previous year. The US economy is affected from the strong dollar, but the number is still strong enough to justify the Fed’s rate hike in Sep.
If we see the details, investment and exports are weak as expected, but the slowdown of imports is a bit of surprise. Personal consumption is weakened, too, which indicates with imports the weak demands within the country.
Continue reading US GDP weakened at 2Q 2015 but still strong enough for a rate hike in Sep
In early 2015, the gold price remained approximately $1150-1250, but as the Chinese economy slowed down, the price finally fell below $1100 in July.
As the Fed was going to rise the interest rate, the bear market itself was predicted by some investors. When the rate rises, the higher yield makes the dollar more attractive, and as a consequence, the gold price, traded in USD, decreases.
However, now we have another influential factor: the slowdown of the Chinese economy, which became more serious than before. So in this article, we contemplate on the two factors that affect the gold price and explain why gold is still a way to avoid the upcoming market crash in a few years.
The investors are trying to be prepared for the Fed’s raising the interest rate in late 2015 and 2016, worried about how much it could affect the markets, but they seem to have forgotten what has been supported the markets for several years.
Have we already overcome the termination of the Feds’ QE? The answer is no. Although the interest rates are kept relatively low, and the US stocks remain near the all-time high, the markets are just supported by QEs by Bank of Japan and European Central Bank.
The portfolios of the investors of all kinds have been distorted by the QEs. According to the paper by the Fed, due to the QE the owners of Treasury securities and MBS shifted their funds into riskier assets. For example, the households sold Treasury bonds and MBS to the Fed and bought riskier assets such as corporate bonds, commercial paper and municipal debt and bonds.
Continue reading Fed rate hikes will reverse portfolio rebalancing and end QE bubbles