Global markets turned upside down and brought the dollar back in the driver’s seat as a number of US Federal Reserve (FED) officials urged to slow down or stop buying of bonds (Q4). The minutes from last month’s meeting reveal that FED-members want to stop the buy bonding before the program’s effectiveness has been fully tested.
The prospect of a halt in bond buying sent stocks sharply lower. The S&P 500 index suffered its steepest decline since November. Investors were split and bewildered whether FED doves, eager to spur growth; or more cautious colleagues were in command. The ambitious 6,5% unemployment target originally set by FED seems at risk. The new development has turned markets extremely nervous and volatile. What Wall Street wants is an absolute sign that FED will continue with bond buying for the indefinite future.
The dollar skyrocketed after the minutes were published and gold and silver prices fell to its lowest level since July. Simultaneously it was rumored that a major hedge fund has liquidated large commodity positions. London copper fell to its lowest level in two months. Asian stock markets also tumbled as oil prices fell. Brent crude is down USD 2 a barrel. The MSCI index of Asia-Pacific stocks fell 1,3% after weeks shining.
One of the hardest hit currencies were once again Sterling Pound (GBP) which continues to slide. During the week USD/GBP is down from 1.5475 to close to 1.52. Euro/USD has dropped to 1.3250. USD/JPY, both currencies regarded as “safe havens” when markets are volatile, traded marginally higher at 93.55.
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