Back
17 Apr 2013
Forex Flash: IMF predicts lower US growth but better than some peers - BTMU
FXstreet.com (Barcelona) - Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that the release of the IMF forecast projections for the US show US real GDP growth of 1.9% and 3.0% for this year and next, lower than before but still respectable in comparison to other major developed economies.
He feels that it is essentially the story behind why the financial markets now expect the Fed QE programme to be tapered later this year and terminated in H1 2014. He writes, “We believe this goes someway to explaining the plunge in gold prices recently. Gold has roughly traded in a USD 1600-1800 range since mid-2011 and although gold rallied back to the upper end of the range it has become increasingly clear that the QE-gold link has broken down.” He suspects that the trigger for the move lower may have been the BoJ QE programme which prompted Japanese retail selling of gold as gold hit a record high in Yen terms and confirmed again the breakdown in the QE gold link. He finishes by writing, “We also believe the performance of the dollar is key here. The DXY index rallied nearly 5% after QE3 was announced and the better performance is reducing demand for gold. It is worth noting that the gold decline recently in percentage terms if the largest since 1980 – the period that followed between 1981-1985 marked the biggest dollar bull run on record! There is little on the agenda today from the US.”
He feels that it is essentially the story behind why the financial markets now expect the Fed QE programme to be tapered later this year and terminated in H1 2014. He writes, “We believe this goes someway to explaining the plunge in gold prices recently. Gold has roughly traded in a USD 1600-1800 range since mid-2011 and although gold rallied back to the upper end of the range it has become increasingly clear that the QE-gold link has broken down.” He suspects that the trigger for the move lower may have been the BoJ QE programme which prompted Japanese retail selling of gold as gold hit a record high in Yen terms and confirmed again the breakdown in the QE gold link. He finishes by writing, “We also believe the performance of the dollar is key here. The DXY index rallied nearly 5% after QE3 was announced and the better performance is reducing demand for gold. It is worth noting that the gold decline recently in percentage terms if the largest since 1980 – the period that followed between 1981-1985 marked the biggest dollar bull run on record! There is little on the agenda today from the US.”