Pulling back from the brink. The Federal Reserve certainly has and so has Silvio Berlusconi (so far).
Not much to say about the Fed directly, except that it’s surely still only a matter of time, but it certainly takes the pressure off the central banks meeting in our region today. German Bund futures have leapt about 1-1/2 points and Italian bond futures are up more than a full point. We can expect emerging market assets to climb sharply too – the Turkish lira is up three percent, for example, giving its embattled central bank some breathing space.
Further out though, what this has done is create more uncertainty rather than giving investors a firm direction of travel. Presumably, Bernanke and co. are somewhat alarmed about the durability of U.S. economic recovery, which should give everyone pause for thought.
The Swiss National Bank, Norway’s Norges Bank and the South African Reserve Bank all have policy meetings.
South Africa’s rand has not been hit quite as badly as the lira or rupee in recent months, but hit it has been. No change is expected in policy, particularly after the Fed sat on its hands, but also because the SARB doesn’t have the firepower to prop up the currency and inflation is running above six percent, too high to cut rates from an already four-decade low of 5.0 percent.