The stock markets around the world have rallied substantailly in the last 48 hours on announcement of the US Federal reserves stimulus package. The S&P 500 is up 2% and is now at a two year high. Risk appetite has led to widespread Dollar weakness with cable testing 1.63 and EUR/USD reaching 1.4280.

Fed Chairman Ben Bernanke announced that there would be $600 billion of stimulus added to the US economy by the middle of next year. This helped to reinforce optimism that the worlds largest economy won’t deteriorate and corporate profits will improve.

The Bank of England announced yesterday that they will not extend QE past the £200 billion level. They are adopting a ‘wait and see approach’ due to last weeks preliminary GDP release. Interest rate were held by both the BoE and by the ECB.

The US has added 115,000 jobs in October with the unemployment rate moving to 9.6%. This figure surpassed all analysts expectations and is a sign that businesses may be starting to gain confidence in the pace of the economic recovery. The Dollar has subsequently gained on the good news against the Euro today and the GBP/USD remains over 1.62.

President Barack Obama has said that today’s employment report is a sign that the economy is recovering from the “terrible damage” caused by the worst recession since the 1930s. He went on to say “the unemployment rate is still unacceptably high,”.

With key central bank meetings out of the way for another month markets will now look towards data watching. We also have the G20 summit next week. There is not a lot of data to offer direction however, with key focus being placed on the tone of comments from key Fed speakers.

The main focus from the UK will be the Wednesday’s release of the BoE’s inflation report. This will continue to show updated growth and inflation forecasts and may shed some light on prospective QE for the future. We also have September’s industrial production report which is expected to show continued growth in the manufacturing sector.

Best Regards

Luke Zorab
Torfx Currency Dealer
(01736) 335285