What is Qauntitative Easing

After its last monetary policy meeting the US federal reserve started talking about a possibility of quantitative easing driving the market high to heaven. Now let us explain what quantitative easing is and find out whether it is good or bad for the US economy and currency market. Quantitative easing is not a complex transaction. The FED exchanges overnight deposits for treasury bonds extending liquidity by pushing private sector savings to the financial markets, i.e. quantitative easing is not just printing money or throwing from a helicopter, it is just an asset exchange transaction, just a swap. It means that when implementing quantitative easing policy, the Federal Reserve pumps money into economy (increasing supply of money) in order to prevent from inflation. Risks include the policy being more effective than expected. That is it, so there is no panic for the market.

Important Slide for USD

Another bottom for the USD was reached as low borrowing costs spurred investors to sell off the Dollar and buy other assets. The USD index was at 77.002, after dropping on Wednesday as much as 0.7% to 76.803. Coming economic recovery spurs investors leave the greenback and try to trade other high profitable units as the greenback becomes highly unappealing to investors.

While the Federal Reserve stimulus measures helped pull the nation out of the recession, it also pumped an enormous amount of Dollars into the economy and with the continuous rise in the jobless rate the Fed is predicted to lift its interest rate soon.

Among important business events capable to make influence on the currency market are the release of the Trade Balance and the Unemployment Claims figures will be released on Thursday at 12:30 GMT.