Fed: Chances of September tapering on the increase

Comments from Dennis Lockhart, Atlanta Fed President, that he ‘wouldn’t rule out September’ would seem to have increased the chances that we will see some very small tinkering with the Fed’s massive QE program starting next month. Remember that Mr Bernanke will be stepping down in February so with his legacy in mind, and despite the ‘helicopter Ben’ moniker, he will probably be keen to have the tapering begin on his watch. The US economy has been on the improve but Fed officials will be very wary of reducing fuel levels just as the fire is starting to take hold.

The USD has made steady gains overnight but the market is still long, especially against currencies like the AUD, and I don’t see any minor tapering having a big impact.