The central bank of Singapore loosened monetary policy without prior notice and joined international policy makers strengthening their respective economies as inflation diminishes. The Singaporean dollar is headed for the largest collapse in nearly three years.
In a policy declaration, the Monetary Authority of Singapore declared it will trim down the policy band for the dollar. It also reduced inflation projections for 2015.
The previous Monetary Policy Statement revealed developments in international and domestic inflation environments which changed the Consumer Price Index inflation outlook for 2015. The Authority maintains it is proper to modify the current monetary policy position.
At the same time, the central bank steers the local note against major currencies and adjusts
appreciation/depreciation rates by transforming the slope, width and middle point of the band. On the other hand, consumer prices in Singapore dropped for the second consecutive month last December.
The Authority maintains a moderate and slow but sure appreciation, according to officials.
This careful adjustment in policy is constant with more benevolent inflation outlook this year and fitting for guaranteeing medium-term steadiness of prices in the economy.
UK’s pound sterling had restricted movements yesterday as the pair of GBP and USD traded at the middle (1.51) range.
While Bank of England Governor Mark Carney will speak in Dublin (Ireland), the focus will obviously be on the US Federal Reserve which is also coming out with its policy statement for January.
Meanwhile, inventories of crude oil slid to 8.9 million.
Observers say the US Central Bank will take more time before finally increasing interest rates. Timing of the rate hike can agitate world currency markets.
US data was not consistent yesterday. Orders for durable goods decreased 3.4 percent which marked a four-month low. Likewise, core durable orders also dropped 0.8 percent for the fifth out of six appraisals. Markets expected gains from the two indicators. On the other hand, consumer confidence went up to 102.9 points over the projection of 95.3 points.
Preliminary gross domestic product for the fourth quarter showed an improvement of 0.5 percent. However, it was lower than the 0.7 percent of final gross domestic product for the third quarter due to sluggish economic progress. Protracted growth and easing of inflation levels means less pressure on the Central Bank Governor in boosting interest rates. The difference of opinion between the BOE and Federal Reserve can strengthen the US dollar at the pound sterling’s expense.
The US Central Bank gave a high mark for the national economy and gave little weight to low inflation while promising to remain patient on the issues of interest rates.
The Federal Open Market Committee spoke of firm expansion and improved performance compared to how it was last month.
FOMC officials acknowledged low inflation that will rise steadily on its way to achieving its two percent goal as consequences of low oil price subsides. They also believe that cheaper energy can aid in bolstering purchasing power of consumers.
Expression of confidence in the position for higher inflation and reduced unemployment indicates the Fed will actually bring up interest rates in 2015.
US economists are convinced that Inflation is the main factor to be considered by the Federal Reserve in making this landmark decision.
Standard & Poor’s 500 Index dropped 1.4 percent and finished at 2,002.16 in the NYSE. On the other hand, Dow Jones Industrial Average incurred a second-day loss as energy shares waned together with apprehensions of global hazards to US economy plus the fragility in multi-national earnings.
10-year Treasury yields went down to 1.72 percent after a previous decrease of 1.70 percent.
The last FOMC statement that referred to worldwide instability was made in January of 2013.
All the 10 committee members supported the Fed’s policy declaration.
Fed officials found out that the American economy increased at an annual pace of five percent during the third quarter of 2014.
Unemployment is also at a remarkable low of 5.6 percent.
The central bank’s desired inflation gauge (personal consumption expenses) increased 1.2 percent last November and remained below its two percent goal for the next 31 months.
Commodity Futures Trading Commission figures showed that financial managers have intensified short positions for WTI intermediate crude to its highest since 2010.
Meanwhile, net-long positions decreased after three weeks.
Crude supply from the United States increased 10.1 million barrels prior to January 16, according to the Energy Information Administration.
WTI surged 50 cents (1.1 percent) to $46.39 per barrel at the New York Mercantile Exchange. US benchmark dropped 44 cents to $45.15 which is the lowest since March of 2009.
Brent oil declined 63 cents (1.3 percent) and closed the session at $48.16.
US production is expected to fall slowly as improvements in drilling technology bolster output. The EIA announced that oil production from new oil wells in Bakken will be twice as much than it was three years ago.
The oil boom has been spurred by the fusion of horizontal drilling and hydraulic fracturing.
WTI short positions went up (6,262 contracts) to 94,203 futures and options while long positions were down 0.3 percent.
Meanwhile, bullish stakes on gasoline increased 5.8 percent to 39,418 contracts while futures moved forward 3.5 percent to $1.3128 per gallon.
On the other hand, retail gasoline average prices slipped to $2.033 per gallon just the other day.
FOREX day traders from different countries have berated IC Markets, based in the central business district of Sydney, Australia for phony margin calls arising from the sudden move of the Swiss National Bank.
This allegedly resulted in huge losses for the investors. The online broker informed clients it was given inconsistent currency rates by liquidity providers which allowed banks to carry out client trades at irregular prices.
After days of going through client trades, IC Markets altered their accounts to show correct levels. However, some traders discovered that they incurred losses due to these margin calls generated by unpredictable prices.
The estimates were very different from the real market price, according to traders.
IC Markets claimed it was trying to address the problems with some 80 clients.
IC Markets managing director Andrew Budzinski clarified that conditions wherein traders were affected because of inadequate margin coming from unfavorable fills are being resolved.
“These are being evaluated on a case-to-case basis which is not divergent from practices embraced by many brokers worldwide,” he added.
The broker is considering whether to cancel negative balances of clients even as a final decision has not been reached.
The problem appears to be the obvious patchy pricing coming from the bank’s liquidity provider when FOREX markets were displaced. Some of these providers have been terminated.
IC Markets is supposedly an Electronic Communications Network that transmits trades into the larger interbank market. It earns a small commission as broker. Online currency trading has become very popular in international markets with turnover going up from $176 billion daily in 2007 to over $380 billion two years ago.
Australia’s Securities and Investment Commission says the abundance of online FOREX brokers is being monitored closely.