Posted on February - 16 - 2011
Traders look to US monetary policy for currency market outlook
“The focus remains on US monetary policy on Thursday after minutes from January’s Federal Reserve policy meeting left traders with a mixed message, with US CPI figures as well as testimony from Fed Chair Ben Bernanke promising to add a bit of colour to what markets can expect in the months ahead.
“Headline inflation is expected to accelerate to an annual pace of 1.6 percent, the highest in eight months but comfortably below the 2 percent level typically considered “normal”, hinting that perhaps the message to be taken away from the Fed’s current posture is that a hawkish shift is indeed around the corner but the current round of QE will be allowed to run its course through June.
“Meanwhile, Bernanke is scheduled to speak on the implementation of the Dodd-Frank financial report bill, but traders are still likely to parse his comments for any clues on monetary policy. Muted price action on periphery Eurozone CDS spreads suggests markets are not particularly concerned about today’s Spanish debt sale.”
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