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A EURUSD Rally to 1.3000 a Tall Task for the Fed

A EURUSD Rally to 1.3000 a Tall Task for the Fed

2012-09-08 01:54:00
John Kicklighter, Chief Strategist

The ECB did its part to leverage the Euro and risk trends higher, now it is the Fed's turn to make its impression. With EURUSD and S&P 500 forging new bull trends, the burden of momentum shifts from finding relief to a persistant global financial threat (the Euro-area crisis) to a proactive speculative drive. Yet, it is difficult to feed investors' appetite for taking on more risk when the outlook for growth and earnings is cooling while yields are scraping record lows. Traders are looking for external support to fill the gap: stimulus. Though there is plenty of event risk related to the effort to temper the Euro crisis next week, much of the short-term relief has been priced in. To keep the EURUSD, AUDUSD, S&P 500 and other risk sensitive assets rising; the Fed needs to meet and potentially surpass high expectations for stimulus.

Produced by: John Kicklighter, Chief Strategist for DailyFX.com

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