US twists again?

The focus for today is on the US’s FOMC meeting later tonight and the question is whether will they or won’t “twist again” or expand their Quantitative Easing programme.  US twists again?A survey of 64 economists by Bloomberg showed that 37 out of 64 expect the Fed to announce an extension of Operation Twist tonight compared to 19 who think not.

If the Fed do go down the road of more QE or “Twist 2” then expect a bounce into risk appetite with Gold and commodities the big winners and gains in the Canadian Dollar and the Australian Dollar expected- and on the flipside expect a weaker US Dollar.

Back to Europe and Greece’s pro-European parties are said to be on their final stretch in forming a coalition government as EU and IMF officials were expected to visit Athens for talks on resuming payment of the country’s bail out funding.

Greece urgently needs €1 billion that was held back from a €5.2 billion payment in May, amid EU anger at the inconclusive first election on May 6.

That cash is expected to be paid before the end of June when the new coalition government is in place.

At the G20 summit there was clear evidence of a desire to move to closer integration to forge a sustainable Europe, a statement noted that “The adoption of the Fiscal Compact and its on-going implementation, together with growth-enhancing policies and structural reform and financial stability measures, are important steps towards greater fiscal and economic integration that lead to sustainable borrowing costs”.

Italian PM Monti added that euro heads are to make crisis decisions in the next 10 days and so the market is expecting progress by or at the EU summit at the end of the month.

Yesterday inflation fell again in the UK with UK May CPI coming in at -0.1% month on month, good news for the Bank of England as this aligns with their forecasts and potentially provides more scope for further QE in the UK.

Later today we have the MPC minutes and unemployment data from the UK to look forward to and interest will focus on any move towards QE evident from the minutes of the last meeting, if so we could see a dip in the Pound.

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