US Fed release more QE

Yesterday the Federal Reserve in America surprised markets with news of a fresh round of Quantitative easing. Most of the markets were expecting some but it is safe to say that it was unprecedented. In fact quite worrying in some ways. They stated they would do a further $40 Billion every MONTH until the unemployment figures starts to fall in the US. The number of people out of work in the US has been stuck between 8.1%-8.3% for over 6 months. They even suggest it would not be until 2014 until it goes under 7%, very poor really. So this additional support could easily continue for over 12 months, adding trillions in the amount of debt the US holds. All this and we really only expect to see an improvement in 3-4 months minus.

So what are the effects?

All this additional investment has been seen as a huge push for risk takers that are happy to do more. So investors pull their funds from the safe haven of the dollar and invest in other currencies like the Australian Dollar. So more people selling the USD makes buying the dollar cheaper, all  the additional demand for the Australian Dollar makes it more expensive to buy.  Buyers of the AUD have lost over $2,000 for every £100,000 traded since the beginning of the week. 

So what shall I do if I need to buy?

If you are a USD buyer, buy now would be my thoughts. If a seller of the USD hold off if you can.

If you are buying AUD, hold on maybe but be aware that it will get worse before it improves I would think. Sellers, well jump on, trade
now at these near 4 month highs for you! I personally would not be surprised to see AUD continue to strengthen due to this demand by another 2 cents in the next fortnight, costing buyers $2,000 for every £100,000 traded.

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Steve Eakins