Forex News Blog
Back to The Headlines
Thursday March 19, 2009 - 13:18:21 GMT
Share This Story
Global-View.com - www.global-view.com
FX Blog - What is Quantitative Easing?
As posted on www.global-view.com
Given the way the Fed's decision to initiate quantitative easing has rocked the forex market, we felt it would be useful to give an explanation of this action and its implications.
GVI Forex Jay 10:31 GMT March 19, 2009
If I can add to the discussion:
The reality of quantitative easing is the central bank prints money to buy securities for the reasons John just explained. This is why a currency weakens as the central bank increases supply of the currency and pushes down interest rates (in the Fed's case, it announced it will be buying $300 bln of 2-10 year Treasuries over the next 6 months and $750 bln mortgage backed securities). The BOE, SNB and BOJ have undertaken similar measures lately.
The reason the dollar got slammed was that market expectations prior to the FOMC decision were that the Fed would not announce the buying of Treasuries and would hold off on that decision. The surprise was in the timing and not the actual decision as the Fed had indicated this would be coming at some time.
GVI Forex john 10:27 GMT March 19, 2009
Simply put, instead of targeting an interest rate, QE means a central bank is targeting bank reserves, or the amount of money available for banks to lend. In the current situation, most central banks have been "force feeding" reserves into the banking system to get banks to lend without regard to the central bank's interest rate target.
In the vernacular of the market, central banks are "printing money". Increase supply and the price should fall.
GVI Forex john 10:22 GMT March 19, 2009
from the GV trading Handbook
By: GVI Forex
The Bank of Japan (hereinafter referred to as the Bank) determined to undertake the so-called "quantitative easing policy" in March 2001, in which current account balances at the Bank were adopted as the Bank's main operating target. Since the start of the quantitative easing policy, the Bank has raised the target level of current account balances several times. As the target level has far exceeded the level of required reserves, the adoption of the quantitative easing policy means that the Bank has had to provide additional funds to financial institutions that do not have incentives to hold a large amount of excess reserves. Such a policy has been unprecedented for any central bank. Thus, the achievement of the target has been a great challenge to the Bank. Under this policy, the Bank has taken various measures to achieve the target, facing occasional difficulties.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."
Elevate Your Trading With The Amazing Trader!
The Amazing Trader includes:
Register To Test Your Amazing Trader
- Actionable trading levels delivered to YOUR charts in real-time.
- Live trading strategy sessions.
- Market Updates with Trading Tools.
Trading Ideas for 20 October 2017
Register for the Amazing Trader
Amazing Trader EVENT RISK Calendar:
Fri 20 Oct
12:30 CA- Retail Sales & CPI
14:00 US- Existing Homes Sales
Tue 24 Oct
All Day flash PMIs
Wed 25 Oct
01:30 AU- CPI
08:00 DE- IFO Survey
08:30 GB- GDP
14:00 CA- BOC Decision
14:30 US- EIA Crude
Thu 26 Oct
11:45 EZ- ECB Decision
12:30 US- Weekly Jobless
14:00 US- Pending Homes Sales
Fri 27 Oct
12:30 US- GDP
14:00 US- final Univ of Michigan
Potential Trading Opportunities
John M. Bland, MBA
- POTENTIAL PRICE RISK: High Fri-- 12:30 GMT CA- Retail Sales and CPI. Top economic indicators.
- POTENTIAL PRICE RISK: HIGH Fri-- 14:00 GMT US- Existing Homes Sales. Top Housing statistic.
co-founding Partner, Global-View.com
EXCLUSIVE: Global-View Daily Trading Chart Points Updated
EXCLUSIVE: Global-View Free Forex Database updated
TRADER ADVOCACY ARTICLES
Trader's Advocate Articles..