Most traders this morning are sitting on their hands waiting for Helicopter Ben Bernanke to release their minutes from the last FED meeting which took place on April 27th. April 27th also marked the day that Chairman Bernanke gave the first unprecedented press conference by a FED chairman after deciding on interest rates. It looks like the FED is trying to follow the likes of ECB Jean-Claude Trichet's footsteps with Q&A conferences but more importantly to answer to the calls of more transparency by Congressman Ron Paul of Texas. Here are a few important details to remember from that conference before we talk about today's implications:
- Bernanke acknowledged the recent pickup in inflation but said they believe the rise in prices will be temporary
- FED cuts growth outlook, raises inflation outlook, with slightly lower unemployment
- FED policy makers see 3.1% to 3.3% economic growth for 2011 down from 3.4% to 3.9%
- UNEMPLOYMENT forecast now @ 8.4% - 8.7% compared to 8.8% - 9%
- Core CPI forecast @ 1.3% - 1.6% for 2011 vs. 1% - 1.3%
This is the best way to describe the effect April 27th had on the dollar: hammering of the dollar ahead of Bernanke, hammering of the dollar during Bernanke, hammering of the dollar through the end of the day and the Asian session.
Today's FOMC meeting should reiterate the continued concerns about the US recovery, minor concerns about inflation and significant hesitation by central bank officials to tighten monetary policy. In terms of QE2, Bernanke let it be known last month that the FED plans to reinvest maturing payments which translates to, the central bank completing their asset purchase program in June and keeping the stimulus at the same level.
USD: Barring anything new revealed by the FED minutes, the dollar looks poised to sell off. Currently commodities are at the highs of the day and US equities are trending upward. Many analysts are quick point out that maybe Bernanke was right in saying that commodity prices will be temporary with the selloff of Gold, Oil, and silver in the first 2 weeks of May. But I don't agree. The selloff in commodities can be attributed to CME, Chicago Mercantile Exchange, raising margin requirements in both Silver and Oil. There is inflation, global worldwide inflation, better yet stagflation. After all is said and done, at 4 o'clock we can go back and worry about the uncertainties centering on Europe.