Geithner and Bernanke Fail To Provide Specifics

After aslight return to risk appetite on Monday and Tuesday risk aversion returned with a vengeance after remarks by Federal Reserve President Bernanke and Treasury secretary Geithner failed to provide specifics about the rescue packages proposed for the troubled US banking sector. This, in turn, resulted in diminished Forex opportunities. The proposed bailout packages were seen as short on specifics and long on promises.

Plans Not Living Up To Expectations

The long awaited remarks from Geithner said that the US government was considering setting up a public and private fund to buy over $1 trillion dollars worth of toxic assets from banks. The plan was seen by many as fumbling by the Treasury and gave the impression that months into the financial crisis the Fed was still struggling to come up with a coherent plan. This sent many Forex traders and investors to the safe haven and Forex opportunities the Dollar and Yen provide in times of crisis. Matthew Strauss of RBC Capital expressed the thoughts of many when he stated, “Geithner’s new bailout plan did not live up to expectations, by a large margin, and his comments that the government “will have to try things we’ve never tried before” and “we will make mistakes” did not exactly instill market confidence.”

Bank Rescue Plan Disappoints

Earlier in the week the Australian and New Zealand dollars had provided Forex opportunities to many investors but the uncertainty resulting from Geithner’s remarks sent many back to the safe haven and limited forex opportunities offered by the Dollar and the Yen. The US Senate passed an $838 billion dollar stimulus package but this was overshadowed by disappointment over the bank rescue plan.

Bank of England Expected to Lower Rates

Both the House and Senate will now have to debate the details of the plan causing further delay and limiting Forex investment opportunities for many investors. In the UK the Bank of England is expected to lower its growth estimate and there is speculation that the bank may follow the Federal Reserve in cutting rates to zero and possibly adopt quantitative easing.

Risk Aversion Dominant

Risk aversion has been the dominant theme throughout the global financial crisis and has limited Forex opportunity for investors. Returns to risk appetite have been short lived but many investors have been able to snatch up what Forex opportunities were available during these short lived periods. It is becoming obvious that this crisis will take longer to fix than was once thought.