Week in FX Americas – Bernanke Giveth and Bullard Taketh away

A couple of days after the FOMC decision of “no” taper sideswiped the market St. Louis Fed President James Bullard has returned, reminding investors that taper is still on the way. Bullard, a voter and moderate, stated first thing Friday in an interview that a taper in October is possible. His comments immediately sent fear into the hearts of equity and bond investors, the biggest net winners from Wednesday “no change decision.” He insists that the US economy is not that fragile and that a $10b taper versus no taper is not a big thing. The difference between “no” taper and “small” taper was a “borderline” call in midweek.

Both dealers and investors will now have to decide what key data to focus on over the coming weeks to shift their allegiance again. They have been bruised hurt and burnt on the first go around from the supposed new “transparent” communication policy of the Feds.

On a day with no economic releases, but with a plethora of Fed speakers, the most “hawkish” of Fed views will be expected to carry the momentum. A taper next month will not be decided by only the Feds view. In mid-week Bernanke pointed the blame towards Capitol Hill as a contributor to this week’s “no” taper decision. Next month, the budget battle in Washington begins and that will have an impact.

• US Jobless Rise But Backlog Blamed
• Fed Taper Delay Bad News for US Economy
• U.S. Home Starts weaker than Forecast
• Yellen’s Chances for Fed Chairman Grow
• Bernanke Does Nothing as Markets Take Off
• Fed’s Decision Reignites Talk of a Global Currency War
• U.S. Dollar Falls to 7-Month Low
• U.S. Stocks Soar after Fed’s ‘no’ to Taper
• So Many So Wrong on Fed Taper
• U.S. Dollar Smashed as Fed Surprises Markets
• Top Candidate Yellen Seen Pressing Fed Emphasis on Stimulus
• US Auto Sector Helps Factory Output Grow 0.7 Percent in August
• Obama Warns Republicans About Impending Economic Chaos if Budget Not Agreed
• Larry Summers Withdrawal Boosted Stock Markets
• Janet Yellen The New Favourite to Head US Fed After Summers Withdraws
• PIMCO Sees Short-Term Debt Rallying After Summers Quits Race
• Summers will not succeed Fed’s Bernanke

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