The US only created 54K jobs in May and the unemployment rate ticked higher to 9.1%. Considering economists and analysts alike had estimates close to 150K, this was a huge disappointment. The next question in the minds of traders, investors, American citizens is will there be another quantitative easing, QE3? The one thing we do know from the FED is that at the end of June, QE2 will end. Bernanke alluded to this in his FOMC minutes, FOMC Minutes - much ado about nothing?.
QE3 may be a more political dilemma as opposed to will printing more money create more jobs. No President has ever been reelected with a higher unemployment rate of 8%. The closest President was Ronald Reagan who was reelected with a unemployment rate around 6%.
According to Mohamed El-Erian of PIMCO, there will be no QE3, click on link to see his interview on CNBC, El-Erian of Pimco says FED Unlikely To Have Third Round of Easing - QE3. However, John Taylor of FX Concepts thinks QE3 is a possibility but will be unsuccessfull: John Taylor: Definitely Another Recession Coming, Buy US Dollars.
If QE3 is implemented, how will the US Dollar react? Let's see how the dollar reacted when QE1 and QE2 were executed. QE1 started at the end of November 2008 and ended March 2010, US Dollar got dumped. QE2 started at the end of November 2010 and will end June 2011, US Dollar got dumped. It's safe to say that an increase of the quantity of US dollars in the market has the effect of devaluing the dollar. So what will happen if/when QE3 is implemented, the US Dollar will get dumped. It's interesting that both QE1 and QE2 both started in November, maybe QE3 starts in November 2011??