So, what is it going to be? That is the trillion dollar question investors are asking the FED as of now, which encompass another question, will the FED defy the market or be ruled by it, because as things stand it will be very hard for Jerome Powell to dissociate the central bank decision from either the market or Trump´s influence on the decision, unless of course he and the rest of the board members are willing to make a stand against those forces.
This is an important ideological question, given that if the FED loses its independence in the investors mind, they will begin to pay more attention to other factors like, if Trump or businesses are “demanding” a lower U.S dollar value, now that the EUR/USD is at a two year low and on a downward channel. Let’s keep in mind that the FED “dual mandate” is to “promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates”, not artificially prolonging the economic growth, for political benefits, through a bubble made by ultra-low rates and a massive asset balance sheet. That bubble is allowing companies a way to inflate stock prices using stock-buybacks with borrowed money, this year, for the first time since the financial crises, the buybacks volume is bigger than the free cash-flow generated by companies, that is a big red flag.
Marco Silva is a Financial Market Specialist with 20 years of experience, with transactions in 12 different countries, involving numerous financial instruments, Specialist in Technical Analysis, Capital Manager, Investment Advisor, Financial Hedging Operations and Algorithm trading developer. Economic Commentator TV and RTP Information for the Financial Markets, Responsible for the Department of Economy / Markets of TVL.
© 2019 High Leverage FX - All Rights Reserved.
© 2019 High Leverage FX - All Rights Reserved.