The undercurrent of market speculation that a change in the Federal Reserve’s policy of quantitative easing is drawing near is likely to be tested in the light of day tomorrow with the release of the FOMC minutes from the April 30-May 1st meeting.
Comments from Federal Reserve board members, statements in previous minutes and a somewhat improved labor market have combined to keep anticipation current. But if past policy is a guide, the Fed will be keep its official focus on the data, which though improved does not make the Fed's labor case, and board members will continue to voice their own opinions in the minutes and in the media.
Currency markets are a bit edgy on the QE topic because of the release. Speculation that the Fed is considering a taper on QE is misplaced but it has been fueled by last month’s NFP report.
The euro raced from 1.2873 to 1.2909 in three minutes beginning at 11:20 ET and touched 1.2918 at 11:45 ET as stops above 1.2880 were executed in the run up to the London close.
Chief Market Strategist