The big buzz about FEDS tapering:
When will the US federal reserve start slowing down on its quantitative easing of $85 billion monthly assets purchases and bond buying that it started to compensate for the 2008-2009 credit crises so as to keep the interest rates low.
Well this article will keep things in layman's terms as there are already several technically detailed and highly complex informative sources available on web.
SO lets begin and see things a bit literally-The markets have been behaving erratically lately and everything thats paired up with the US dollar seems to be going up like a rocket!
Pound has made quite a climb recently against the USD and even the aussie dollar is rising!
Well what the heck! week after week the data from US has been overall good with just one or two misses.
EUROzone has been in a rut till now and still we see euro rise and rise against the US dollar.
Lets consider the japanese YEN here- the Bank of JAPAN has made itself crystal clear to the entire world that it wants the yen weaker against the US dollar and for that it will work against the value of yen to bring higher inflation!
BUT,what is happening is that with every passing week the USD/JPY has been falling and now has started looking bearish in the mid-term perspective set to go below 95 handle.
All this is happening despite of a reasonably good data show by the US week after week!
So what is all this actually hinting at?WHY are currencies rising against the USD?
Here's the clear and quite simple answer for you all-
yes! the FEDS will start tapering their $85 bn quantitative easing policy in september!
AND every currency that's paired up with the USD is hell scared of this fact and are trying to create as much buffer as possible to accommodate for the imminent USD comeback in next few weeks! because once the feds announce the tapering next month,the USD will shoot up several hundred pips against every currency and will knock some sense back into the forex markets.
I would recommend not to take long or short positions just yet and don't bet against the US dollar.