FED tapering fears worry wise money markets

FED induced volatility across the US Dollar crosses is the major wise money markets theme this week- after the deliberate vagueness from Chairman Bernanke over the taping of asset purchases at the end of last week.
FED tapering fears worry wise money markets
We are desperately trying to discount the effects of withdrawing stimulus, particularly withdrawing it too early, leading to whipsaw action in risk markets and across the USD pairs.

Add to the mix the best consumer confidence figure from the US since the financial crisis and the overall sentiment gets even messier to try and gauge. What exactly is the dominant trend here? An improving US economy or the Fed scaling back asset purchases, the recent volatility suggests no one is quite sure of the answer at the moment.

Apart from the usual month end flows to keep things interesting, today should be reasonably quiet because of a lack of big ticket data. Looking forward to next week there is the ECB and Bank of England monthly meetings plus US non-farm payrolls to digest.

Turning first to the central banks, both are expected to keep policy on hold, with more details from the ECB on its credit easing policy top of the agenda after announcing the bare bones of it last month. June marks the outgoing BoE governor last MPC meeting before Mr Carney takes over and he is not expected hand over with a change to the asset purchase scheme.

Non-farm payrolls for May are expected to show around 175K jobs created and the unemployment rate to continue to fall, from 7.5% to 7.4%.

Fed policy is highly unlikely to be affected to any changes to the data but the tapering effect, as the market tried to second guess the next move by the Fed is likely to be large meaning volatility is here to stay for the time being.

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