Strong dollar will threaten global gold market

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Federal Reserve ◽  
Gold Price ◽  
Direct Access ◽  
Quantitative Easing ◽  
Price Setting ◽  
Foreign Investors ◽  
Content Type ◽  
Gold Market ◽  
Market Outlook

Subject Gold market outlook. Significance The gold price is up only 0.9% since the year started, despite Greece's negotiations with its creditors and resulting stronger demand for safe haven assets, as the dollar's strength and buoyant equity markets weigh on investor appetite for gold. For several years, gold benefited from expectations of negative real interest rates, but the end of the Federal Reserve (Fed)'s quantitative easing programme has eliminated the main macroeconomic argument for investors with dollar-denominated wealth. While there is evidence of the physical metal migrating to Asia, the process has been accompanied by an even stronger demand for dollar assets, undermining any gold price gains. Impacts The London Bullion Market Association has selected ICE benchmark to administer price-setting, which will be based on electronic auctions. China will provide foreign investors with direct access to its gold market. Holders of distressed mining assets will fall prey to companies with easier access to financing, reducing the industry's fragmentation.

Rising geopolitical concerns will help gold gain more

2020 ◽  
Keyword(s):  
Interest Rates ◽  
Precious Metals ◽  
Organised Crime ◽  
Gold Price ◽  
Price Ratio ◽  
Content Type ◽  
Gold Market ◽  
Reserve Bank ◽  
The Us ◽  
Copper Gold

Subject Gold market dynamics. Significance The gold price rose above 1,570 dollars per troy ounce this week for the first time since April 2013. This follows a near-20% gain last year, the largest in a decade. Moreover, this came as the dollar largely flatlined last year, and the unusual extent to which the gold price outpaced the dollar led it to a record price in many local currencies. Interest rates fell worldwide in 2019 and long positions in gold, which benefit when it increases in value, tripled compared to the 2014-18 average. Impacts Stoking interest in the market, the Reserve Bank of India is offering senior gold bonds yielding 2.5%, and discounts for online buyers. A headwind is US prosecutors' labelling JP Morgan’s precious metals desk a 'criminal enterprise', a term often linked to organised crime. The cryptocurrency market is seeing the issuance of gold-backed tokens surge; Tether Gold is 100% backed by bullion reserves. Gold is benefiting from the growth in wireless applications for 5G infrastructure, offsetting demand losses from other tech applications. The copper-gold price ratio will rise if US-China trade conflict eases before the US election, but US rate cuts could curb copper’s gain.

ECB QE and growth may obscure Polish political risk

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Federal Reserve ◽  
Economic Recovery ◽  
Coalition Government ◽  
Parliamentary Election ◽  
Quantitative Easing ◽  
Content Type ◽  
Inconclusive Result ◽  
The Us

Significance Having fallen against the resurgent dollar this year, the zloty has lately been strengthening, since the US Federal Reserve surprised financial markets by striking a more dovish stance than expected on both the timing and pace of the anticipated tightening in monetary policy. While the zloty and Polish stocks had suffered because of fears of a rise in US interest rates, local bonds have been underpinned by the ECB's quantitative easing (QE) programme. The effects of QE and a brisker economic recovery may temporarily offset the risk of an inconclusive result in the parliamentary election in October. Impacts Investors have yet to price in the risk of a hung parliament in Poland following October's election. The vote could lead to the formation of a weak and unstable coalition government. The risk of an unstable coalition is particularly high, given the strong likelihood that PO's share of the vote will decline sharply.

ECB's QE will buoy EM bond markets

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Developing Economies ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Central Banks ◽  
Capital Inflows ◽  
Bond Markets ◽  
Quantitative Easing ◽  
Content Type ◽  
Large Current

Subject Opposite forces are shaping investor sentiment towards EM assets. Significance Investor sentiment towards emerging market (EM) assets is being shaped by the conflicting forces of a strong dollar and the launch of a sovereign quantitative easing (QE) programme by the ECB. While the latter is likely to encourage investment into higher-yielding assets, such as EM debt, the former will keep the currencies of developing economies under strain, particularly those most sensitive to a rise in US interest rates due to heavier reliance on capital inflows to finance large current account deficits, such as Turkey and South Africa. Impacts EM bonds will benefit from ECB-related inflows, while the strength of the dollar will keep local currencies under strain. Higher-yielding EMs will benefit the most from the ECB's bond-buying scheme since they provide the greatest scope for 'carry trades'. The collapse in oil prices is forcing EM central banks to turn increasingly dovish, putting further strain on local currencies.

Japan will stay the course on monetary easing

2018 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Central Banks ◽  
Quantitative Easing ◽  
Content Type ◽  
Bank Of Japan ◽  
Target Date ◽  
Low Levels ◽  
Global Economic Growth ◽  
First Time

Subject Monetary policy in Japan. Significance The monetary policy board of the Bank of Japan (BoJ) at its last meeting abandoned its prediction of when the nation will reach its 2% inflation target, the first time it has omitted a target date since Governor Haruhiko Kuroda introduced his policy of radical monetary easing five years ago. Impacts Japan’s interest rates will remain at historically low levels for at least two more years. The yen will remain relatively weak as other countries’ central banks end their quantitative easing programmes. A weak currency plus widespread global economic growth will create strong demand for Japanese exports.

Further Mexico rate hikes likely in 2018

2017 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Federal Reserve ◽  
Content Type ◽  
The Us ◽  
Wage Increases

Subject Monetary policy moves. Significance The Bank of Mexico (Banxico) increased its target interest rate by 25 basis points, to 7.25%, on December 14, responding to a similar move by the US Federal Reserve (Fed) the previous day. The hike was the first to be taken under new Governor Alejandro Diaz de Leon and pushes the rate to its highest level since March 2009. Impacts Tighter monetary policy will weigh on growth in 2018 and may hit the PRI’s electoral prospects. More expensive credit will hit consumption moderately, as interest rates remain relatively low by historical standards. The possibility of wage increases edging up will feed inflationary expectations.

Loose policy outside US will check bond sell-off

2017 ◽  
Keyword(s):  
Federal Reserve ◽  
Tax Reform ◽  
Emerging Market ◽  
Quantitative Easing ◽  
Treasury Bonds ◽  
Content Type ◽  
Volatility Index ◽  
Bank Of Japan ◽  
Bond Funds

Significance The pace is partly being checked by continued Bank of Japan (BoJ) and ECB quantitative easing (QE). Benchmark ten-year Treasury yields have gained around 30 basis points (bp) since August but Japanese and German yields have risen far less. US bonds are being strained by the Federal Reserve (Fed)'s more hawkish stance and the prospects of even modest tax reform, but investors scepticism about the pace of tightening is suppressing volatility. Impacts Gradual monetary tightening is unlikely to stir the volatility index from its near-20-year low but a sudden sharp shock could. Inflows into emerging market bond funds in 2017 are on track to exceed their 2012 high of 103 billion dollars despite uncertain prospects. There is scant evidence yet that the ‘reflation trade’ is back; ten-year Treasury bonds are still nearly 25 bp below March levels. Timing and triggers of a US equities downturn are hard to predict; two potential triggers are a US policy mistake and ECB miscommunication.

Prospects for emerging economies in 2016

2015 ◽  
Keyword(s):  
Emerging Markets ◽  
Emerging Economies ◽  
Federal Reserve ◽  
Quantitative Easing ◽  
Fiscal Deficits ◽  
Content Type ◽  
Economic Fundamentals ◽  
The Us ◽  
Lift Off ◽  
Public Debts

Subject Prospects for emerging economies in 2016. Significance Emerging markets (EMs) face formidable headwinds as their economic fundamentals deteriorate and the US rates 'lift-off' gets closer: China's slowing growth, the commodity sell-off, investment cuts, depreciating currencies and high debt levels, especially dollar-denominated debt. Neither a delay in the Federal Reserve (Fed) rate rise nor the forthcoming quantitative easing (QE) extension by the ECB will provide long-lasting respite amid widening fiscal deficits and rising public debts.

Foreign holdings of EM debt are a key global risk

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Federal Reserve ◽  
Emerging Market ◽  
Central Banks ◽  
Foreign Investor ◽  
Bond Markets ◽  
Global Risk ◽  
Content Type ◽  
China And India ◽  
China’S Economy

Subject Risks surrounding increased foreign participation in EM bond markets. Significance The rise in the dollar in anticipation that the Federal Reserve (Fed) will start hiking interest rates next month is putting emerging market (EM) currencies under renewed strain. This stress is testing the resilience of EM bond markets, many of which, such as Malaysia and Indonesia, have high levels of foreign investor participation, or, like China and India, are seeking to attract more. Impacts Monetary policy divergence between the Fed and other leading central banks will put further upward pressure on the dollar. A strengthening dollar will extend oil's 6.6% price drop since November 3, undermining sentiment towards EMs. The composition of foreign holdings (institutional money versus flightier capital) will be key to gauging the vulnerability of EM debt. The largest source of vulnerability in EMs will remain the threat of a harder-than-expected landing for China's economy.

ECB monetary review could boost policy flexibility

2020 ◽  
Keyword(s):  
Climate Change ◽  
Monetary Policy ◽  
Interest Rates ◽  
Board Members ◽  
Quantitative Easing ◽  
Executive Board ◽  
Governing Council ◽  
Content Type ◽  
Political Skills ◽  
Tackle Climate Change

Subject ECB monetary review. Significance The new ECB president wants to extend the bank’s remit to include addressing climate change, but disagreements are mounting over the traditional mission, monetary policy. Christine Lagarde headed her first monetary policy meeting on December 12 and, as expected, stuck to Mario Draghi’s policy path. However, the divisions between Governing Council members who support the ultra-loose stance and those who oppose quantitative easing (QE) and lower interest rates will deepen. Impacts New Executive Board members include Isabel Schnabel and a replacement for Benoit Coeure; they will influence the way the board leans. Lagarde has little banking expertise but will use her political skills to encourage governments to expand fiscal policy. Lagarde wants the ECB to tackle climate change but this is technically challenging and will be opposed in the Governing Council. The ECB's chief economist and the directors general for economics and monetary policy will have more sway under Lagarde.

The quantitative easing effect on the stock market of the USA, the UK and Japan

2016 ◽  
Vol 43 (6) ◽  
pp. 1006-1021 ◽  
Author(s):  
Luiz Lima ◽  
Claudio Foffano Vasconcelos ◽  
Jose Simão ◽  
Helder Ferreira de Mendonça
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Stock Markets ◽  
Positive Impact ◽  
Central Banks ◽  
Quantitative Easing ◽  
Subprime Crisis ◽  
Content Type ◽  
The Usa ◽  
The Uk

Purpose The purpose of this paper is to analyze if the unconventional monetary policy, known as quantitative easing (QE) practiced by central banks in the USA, the UK, and Japan was effective to increase the market share after subprime crisis. Design/methodology/approach In order to analyze the effect of the QE on the stock markets of the USA, the UK, and Japan, the authors use an ARDL model to find the long-run relationship among the variables. Findings The findings denote that the QE implemented by the central banks in the USA, Japan, and the UK had a positive impact on their stock markets. Originality/value The results of the paper give some new insights about the conduction of monetary policy when the interest rates are close to zero.

Sign in / Sign up

Export Citation Format

Share Document