Chinese central bank cut their interest rates which are one year benchmarks of lending and deposit rate respectively. Both rates are cut 25bp, where the lending rate is to 4.35% and the deposit rate is to 1.50%.
On the western side, ECB indicated new stimulus could be introduced around December, which implies further quantitative easing is expected. It also added the deposit rate could be cut into negative territory.
Market is likely to start doubting if US federal reserve increase US interest rate.
Stock market have been closed positively on Friday in major economic zones, such as DJA, FTSE100, Nikkei225, CAC40 or DAX Index.
Although the market have been bullish for the week, additional stimulus of rate cut and quantitative easing implies the economic recovery is still not enough.
Since Lehman crisis, record low rates and quantitative easing had been undertaken in the global economy. US had set zero rate and introduced QE until 2014. UK had managed their interest rate at record low level and undertaken QE until 2013.
While the global economy seems be still struggling, it is probably doubtful if continuous monetary easing recover the economy. Once market consensus start doubting it, they will become vulnerable to the risk.
By the way, the trend and momentum of GBPJPY indicates it is expected downward trend in a coming week. Currently, it stays around 186 and the signal indicates it could be down to 183 in the week. It is possible if the market turns to conservative.
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