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.

August NFP Dropped by 54,000

According to the US Labor Department, nonfarm payrolls dropped by 54,000 in August, however, analysts anticipated sharper decline. The US jobless rate remains steady at 9.6%. The US dollar sharply dropped shortly after Bureau of Labor Statistics released a report. Employment in private-sector payroll surged by 67,000, - official figures show. For instance, in July 2010 overall payrolls declined by 131,000 and payrolls in private sector rose 71,000.

Average earnings per hour rose by 0.2% or 3 cents to $19.08 while experts had expected 0.1% surge. The average workweek remained unchanged at 34.2 hours.

Yesterday the market moved up as ECB raised economic forecast in Euro-zone for 2010 and 2011. However, the European refinancing rate remained unchanged at a record low of 1%.