Fed – Tapering or the definition of tapering
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"] [/caption]
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 article).
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....