Spreadex Market Update
Cameron defends strategy
David Cameron has defended the current strategy that his government has in place amid opposition accusations that the current policies in place are a shambles.
Cameron’s focus is on protecting the people who are struggling to pay the bills, and plans on particularly tackling the high energy bills.
With the corporate reporting season getting underway, Asian shares have failed to inspire as investors stayed cautious after global shares faltered overnight on weak earnings report and outlook.
While excessive risk aversion has softened there is little to be positive about the global growth slowdown, any dip in the markets maybe seen by some as a buying opportunity.
Meanwhile the Bank of Japan’s easing of monetary conditions will help push the dollar up against the Yen, but the effect on the economy from easing is limited. More prominent are the recent market flows which have been pointing to a weaker yen.
Several central banks are due to hold policy meetings this week, including the U.S.
Federal Reserve, the Bank of Canada and the Reserve bank of New Zealand. All of them are expected to keep rates on hold but may offer dovish statements. It is perhaps prudent to engage in risky assets in FX, taking advantage of the low volatility conditions being supported by the central bank policy.
The Fed is likely to opt for a review of the impact that QE has had last month keeping a low profile before the November 6th U.S. elections.
In the U.S. the prospect of the fiscal cliff is looming large and would hit the recovering economy hard.
If congress fails to reach a deficit reduction deal by the end of the year, it will automatically trigger big spending cuts and tax increase in 2013.
However, rather than bring the dollar down, the automatic spending cuts could be viewed as a sign of fiscal discipline.
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