Wednesday August 5, 2009 - 13:12:03 GMT
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Bank of England Likely to End Asset-Buyback Program
Better than expected overnight reports out of the United Kingdom should solidify speculation that the Bank of England is prepared to temporarily end its asset buyback program. Overnight it was reported that U.K. industrial production was up as well as U.K. house prices. Economists had expected both reports to be flat to lower. These reports serve as additional signs that the country is emerging from its recession.
The Bank of England next meeting is August 6th. At this meeting BoE officials are expected to keep interest rates unchanged at near 0% while announcing that its program to purchase of government bonds served its purpose and should be temporarily shutdown.
Stock Index futures are called steady this morning. Upside momentum seems to be slowing as this rally appears to be running out of steam. Profit-taking may be taking place as many investors do not see value at current levels which means the indices may have to break in order to attract additional funding.
Despite the potential weakness in the stock market, September Treasury Bonds and Notes are trading weaker. Look for a turnaround in these markets if the equity complex gets hit with a substantial decline.
The Dollar appears to be ready to make a comeback of a substantial decline over the past week. The choppy action in the equity markets is indicating that appetite for risky assets may be subsiding which could trigger a short-covering rally in the Dollar while pressuring the currencies. The September Canadian Dollar is the most vulnerable to a break because of extremely overbought conditions.
Precious metals could see a decline if the Dollar strengthens. December Gold and September Silver have both seen tremendous runs over the past week. Profit-taking because of the stronger Dollar and technically overbought conditions could pressure these two markets today.
Falling equity and commodity prices coupled with a stronger Dollar may pressure September Crude Oil today. Any weakness could be exaggerated if inventory numbers come out higher than expected.
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