Despite a buoyant market ahead of the Fed the afternoon session
is being clouded by concern coming out of a Financial Times (FT)
article about how Big Ben may be more ready to talk tapering on
Wednesday that many had thought.
[caption id="attachment_60436" align="alignright" width="300"
caption="Federal Reserve chairman Ben Bernanke"]
Everyone knows the Fed in soul a quandary about when and where
to taper and under what economic conditions.
What's clear is that Fed is at least as concerned as the market
reaction to their moves as they are the economic reaction (maybe
because the Fed has somehow decided that their mandate to stimulate
growth can involve stimulating the market who then lead to rising
confidence, which leads to rising growth, etc...for another
Be sure of one thing, Ben is trying to point out that if they
begin tapering and when they actually begin tapering it will be
because economic strength warrants it.
They will never walk away from the burning building and the FT
article this afternoon uses that metaphor.
Either way, the markets need to get on with their tough love and
understand that if the Fed is stepping away from the building the
fire is out.
This economic fire is far from squelched and thus the Fed needs
to train the market better than they have.
They mean what they say and say what they mean. No matter
what the wording is, the U.S. Dollar is oversold here. With
the U.S. dollar at 80.50 it's too cheap on the DXY and or more a
result of recent carry trade unwinds. Own the U.S. dollar
into the Fed meeting. Do it now....