The Non Farm Payroll data from Friday has left the FED boxed in a corner, with world markets now waiting for the inevitable introduction of a further round of quantitative easing, now referred to as QE2. With the US, Canada, and Japan closed today for public holiday's, the forex markets have had little in the way of news, as we now wait for the FED to react to Friday's numbers, which were far worse than expected. The meetings over the weekend between the various world leaders achieved little if anything, other than some bland words about 'working together', which is code for every one for themselves, and as such we can expect the currency wars to develop into increasingly bitter exchanges, as central banks act in their own self interest to protect their export markets from a strong currency. As always the FT hits the nail on the head and explains all the issues now facing an increasingly beleaguered FED, including disinflation, inflation and deflation and the effect Friday's news has already had on the bond markets. An excellent video for forex traders, which I hope helps to provide some insight into the complex and paradoxical issues now facing the US central bank.
The US Federal Reserve is yet to act, but has talked itself into a corner. James Mackintosh, investment editor, explains, that now the bond markets have already priced in a further round of quantitative easing, so-called QE2, the Fed has lost its room to manoeuvre without risking a disappointment.
Fed talks itself into corner - just click on the link to play the video.
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