Will the Consumer Confidence Report Confirm the Uptrend
Tuesday trading offers a few key reports including the GBP Nationwide HPI monthly report at 7:00am GMT, in addition to the CB Consumer Confidence survey later in the day at 3:00pm GMT.
Traders will be looking for signs of stability as talk of a potential breakup of the Euro bloc increases market volatility. In these conditions, binary options offer the perfect trade! For more insight on the Consumer Confidence report and its impact on the market, open account with Tradesmarter.com.
Trade Alert for the CB Consumer Confidence
Released monthly, the report shows the composite index based on surveye of 5,000 households rating current and future economic conditions including labor availability, business conditions, and overall economic situation.
Why is the CB Consumer Confidence Important
Financial confidence is a leading indicator of consumer spending, which accounts for a majority of overall economic activity. If the report comes out positive, it should be a nice boost to the USD against major cross pairs.
Market Events
Markets Need Quantitative Easing!
By now, it is obvious to most investors that equity markets cannot stand on their own. Without quantitative easing (QE) – ie, money printing – asset prices sag, banking systems freeze, and the global economic growth stalls. To see the visual impact of QE on markets, we overlay the approximate timeframes of the two US QEs and the S&P500 Index below. The red rectangles are the periods in which the US Federal Reserve engaged in QEs.
The fact that SPX plunged shortly after both QEs ended were no coincidence. For example, just one month after the Fed ended QE2 in June 2011, the global credit system seized up, culminating in a sharp fall in equities in early August. European banks were particularly hit by a shortage of dollar funding. Since QE2 ended, all equity markets have remained weak.
So, a ‘prerequisite’ for stronger equity markets is obvious: more QE(s)! Will the Fed oblige? Probably. The US central bank has already ruled out hiking rates until 2013. And it will probably do ‘QE3′ if the SPX drops further from here. The BoE is expanding QE by 75 billion pound. But, in our opinion, the next central bank to conduct a large-scale QE is not the Fed but the ECB. The European sovereign debt crisis demands it. Starting in 3Q this year, the ECB has started buying some Italian and Spanish government bonds. It is likely continue to do so – expand, even – until the crisis subsides.
View: Equity markets are currently under stress as investor confidence is sapped by debt problems, particularly in Europe. Eurozone needs a dose of QE to buy time for a wholesale restructuring of the political framework (such as fiscal union). The longer this QE is delayed, the more uncertainties it will bring.
