News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Bearish
Gold
Bullish
GBP/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bearish
More View more
Real Time News
  • The rest of the New York trading session is absent major scheduled event risk with US markets closed for the Martin Luther King Jr holiday. There is always a risk of unscheduled developments
  • Commodities Update: As of 17:00, these are your best and worst performers based on the London trading schedule: Silver: 0.50% Gold: 0.41% Oil - US Crude: -0.55% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/eXSdZgvVeB
  • Despite China's better-than-expected 6.5% 4Q GDP report, $USDCNH is still up on the day. There is strong external influence on this rate, but Dollar still exerts the greater pressure. If it breaks 6.50 and Biden keeps pressure on China trade, I'll be watching https://t.co/5W5tcfeTZ5
  • Forex Update: As of 17:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: 0.19% 🇨🇭CHF: 0.05% 🇪🇺EUR: -0.02% 🇨🇦CAD: -0.16% 🇦🇺AUD: -0.25% 🇳🇿NZD: -0.28% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/BrmnTuolx0
  • The Capitol of the United States has been temporarily shut down ahead of President-Elect Biden's inauguration out of caution
  • Another Dollar pair on my radar is $USDCHF. Its 20-day day correlation coefficient to EURUSD is -0.90 (very strong negative). If the latter's break is sustained, both have appeal. If it stalls (soon), USDCHF is still abiding its resistance which supports establishing levels https://t.co/Pcre3xCbYd
  • Indices Update: As of 17:00, these are your best and worst performers based on the London trading schedule: US 500: 0.13% France 40: 0.11% Germany 30: 0.09% Wall Street: 0.07% FTSE 100: 0.03% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/ZXdpvpEJJ3
  • Germany's central bank (Bundesbank) warned earlier today in its monthly report that if the government extended its Covid lockdown, the country could suffer "a sizeable setback"
  • The US Dollar Index rallied more than 0.6% this week marking the second consecutive weekly advance. Get your $USD update from @MBForex here: https://t.co/hVshzMbc31 https://t.co/LG0HG9fQ4c
  • There are a few Dollar pairs that have offered up a provocative, tentative technical break to suggest a reversal is possible. EURUSD is the top of my list to watch but $NZDUSD is of interest as well with many kiwi crosses offering similar view https://t.co/Ss74IIOdc7
Why the Time to Taper Is Still Right Now

Why the Time to Taper Is Still Right Now

Kathy Lien, Technical Strategist

Friday’s non-farm payrolls (NFP) report cast much doubt over the likelihood for Fed tapering, but given the market’s expectations and favorable bond market conditions, the best time to taper may be right now.

In December 2012, the Federal Reserve tied interest rate hikes to the unemployment rate, making it clear that job creation is the number-one focus. For this reason, Friday's non-farm payrolls (NFP) report was extremely important, and now, the central bank has a tough decision to make in less than two weeks.

Whether it is a mistake or not, policymakers have been extremely vocal about their intentions to reduce asset purchases, and through their comments, they have effectively committed to a major policy change before the end of this year.

Up until Friday's NFP release, the lack of consistent improvements in US economic data had investors divided on when the central bank will act, and the highly disappointing payrolls report doesn't make the decision any easier.

Payroll growth was weak, and despite the decline in the unemployment rate, the labor participation rate hit a 35-year low, but a number of Fed Presidents, including Federal Open Market Committee (FOMC) voter Esther George, who spoke after the jobs number, still believe that the central bank should taper this month.

In fact, George called for asset purchases to be cut by $15 billion in September, with future purchases split evenly between Treasuries and mortgage-backed securities. Granted, however, George has voted against continued quantitative easing (QE) for the past five meetings, and her views may not be a huge departure from those of her colleagues.

Based purely on the decline in the unemployment rate, the Federal Reserve should begin to taper. Back in June, Fed Chairman Ben Bernanke indicated that the central bank would begin to reduce the size of its asset purchases later this year and end them completely next year. He added that, "In this scenario, when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7%."

The jobless rate is now at 7.3%, which is not far from the target level, but the problem is that people dropping out of the workforce is to blame for the decline, not stronger labor market conditions overall. Now, the Fed has a difficult decision to make, and while the chance of a reduction in asset purchases in two weeks’ time has declined, it is not off the table altogether.

For this reason, Friday’s NFP report has definitely hurt the US dollar (USD) rally, but has not killed it completely. Further position adjustments are likely, though.

We know there is a high level of support inside the central bank for reducing asset purchases, and the only question remains the timing. Given the recovery in bond prices and fall in US Treasury yields, there may not be a better time than right now for the Fed to taper.

If the central bank stays on course, any changes in monetary policy will be symbolic, which means policymakers could opt for an incremental reduction wrapped by a dovish FOMC statement intended to prevent a rebound in yields.

Between the slowdown in the labor market recovery, debt ceiling debate, and geopolitical tensions, the Fed could also delay changes until December, but the proximity of the holidays and the end of Bernanke's term makes this option less palatable.

Retail sales data will be released this week, but that is the only noteworthy US economic data on the calendar. Considering that the report is not due until Friday, investors will most likely spend the week digesting the payrolls data and Chinese economic reports. A number of key releases are expected, including trade balance, which could drive risk appetite in an otherwise quiet week.

By Kathy Lien of BK Asset Management

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES