By Russell Glaser<\/p>\n
A recent group of Federal Reserve members have come out in favor of tightening US monetary policy and scaling back the Fed\u2019s $600B quantitative easing program. Today\u2019s non-farm payrolls report could go a long way to convince additional Fed members that the time has come to begin the normalization of monetary policy. This would ultimately lead to dollar strength, but more vocal support will ultimately be needed.<\/p>\n
There have been multiple instances of Federal Reserve members publicly declaring their support for the reigning in of US monetary policy which in turn boosts the dollar.<\/p>\n
Last Friday, St. Louis Federal Reserve Bank President James Bullard said the Fed should review its program of quantitative easing in light of recent positive economic data as the US economy, \u201cIs looking pretty good.\u201d Bullard, who does not have a vote on the Federal Reserve Open Market Committee said during the upcoming April meeting, the Fed may reexamine its decision to purchase $600B in US government bonds in order to lower US interest rates further and support the economic recovery.<\/p>\n
Bullard continued his vocal support for tightening of monetary policy in regards to QE II, \u201cThe economy is stronger and inflation is higher than when we did the decision,\u201d Bullard said. \u201cSo why aren\u2019t you adjusting policy? If you are not adjusting, you don\u2019t have a state-contingent policy. It would be an important signal to send.\u201d<\/p>\n
Philadelphia Federal Reserve Bank President Charles Plosser proposed a strategy of raising interest rates and reducing the Fed\u2019s balance sheet on which it holds billions of dollars of US treasuries and other bonds. Plosser also does not have a vote on the Federal Reserve Open Market Committee<\/p>\n
Yesterday Minneapolis Fed President Narayana Kocherlakota helped to boost the dollar when he commented to the Wall Street Journal that the fed funds rate could rise by 75 bp by the end of 2011. Kocherlakota is considered an inflation hawk and is a voting member on the Federal Open Market Committee.<\/p>\n
Further speeches today by Charles Plosser and New York Fed President William Dudley may also have an impact on the dollar. Dudley who does have a vote on the FOMC is considered an inflationary dove.<\/p>\n
The Fed focuses heavily on inflationary data and unemployment numbers. Core inflation in January rose by 1.6% on a yearly basis, a rate well within the Fed\u2019s target. Unemployment will need to rise as well. While the February numbers were a positive sign with the US adding 192K new jobs to the economy, today\u2019s jobs report will also have to rise above expectations of 191K to influence the opinion of those in support of QE II and loose monetary such as Ben Bernanke, Janet Yellen, and William Dudley.<\/p>\n
This should keep the dollar on its back foot<\/a>, particularly versus currencies with expectations for central banks to raise interest rates <\/a>such as the euro, pound, and Australian dollar.<\/p>\n Forex Market Analysis provided by ForexYard. <\/a><\/strong><\/em><\/span> \u00a9 2006 by FxYard Ltd<\/p>\n Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.<\/p>\n","protected":false},"excerpt":{"rendered":" A recent group of Federal Reserve members have come out in favor of tightening US monetary policy and scaling back the Fed\u2019s $600B quantitative easing program. Today\u2019s non-farm payrolls report could go a long way to convince additional Fed members <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-20445","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/20445","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=20445"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/20445\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=20445"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=20445"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=20445"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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