Central banks in hot seat
With Bernanke leaving the door open but not committing to anything ahead of Draghi’s announcement on Thursday, it looks like the Fed and the ECB have been playing a poker game, with each central bank waiting for the other one to act first. Considering though that it is the ECB that is presiding over an economy in a sovereign crisis at the moment, the urgency for the Fed to act is less. If one looks at the markets, Friday’s message seems to be pretty clear. With equities sagging back lower and treasury yields and gold higher, it seems that stocks fully comprehend that QE will not come without more pain. With Dennis Lockhart, one of the most moderate Fed governors, stating that accommodative policy would not be warranted unless jobs creation was steadily under 100K, this week’s NFP figure will once again function as a gauge of more easing. Until then all eyes and ears will be on Draghi’s announcement on Thursday, especially after he stayed in Europe to trash out his plans rather than joining Bernanke’s symposium.