FED begins QE2

The FED last night released its policy plans to further loosen monetary policy and attempt to kick start the ailing US economy. The Federal Open Markets Committee announced additional Quantitative Easing (QE2) measures to the tune of $US600b in the purchase of US treasury bonds, while continuing to re-invest in maturing mortgage backed and other securities. In the statement released with the announcement, the Fed elevated the importance of inflation as a measure of stimulus, as fears of deflation continue. If QE2 doesn’t work, we expect the fed chairman Bernanke to push for QE3 and QE4.

The measures in the US helped move the AUD through parity to reach a high of 1.006. It's still over 1.00 at time of this email. The US bonds are remain significantly lower than yields in Australia 2-years .034%, 10-years 2.55%.

Today in the markets, Retail Trade and the Trade Balance will be released locally and may raise a few eyebrows if the numbers don’t come in as expected. Tonight brings further announcements from central banks from Europe, as the Bank of England and the European Central Bank will release policy announcements.