Forex – What I Like / Dislike 01.25.13

Will be on CNBC Street Signs this morning and wanted to give you a sneak peek of my notes:

I like EUR and AUD

For EUR:
– All of $ that was parked in Switzerland and U.K. for safety and now its coming back
– Strong German data means IMF and others could be underestimating EZ growth
– ECB begins taking back liquidity with LTRO repayments

– Sharp move lower not warranted
– Chinese data consistently surprising to upside
– RBA will leave rates on hold

I dislike

– Triple Dip Recession Risks
– Investors and central banks dumping GBP
– Talk of EU Referendum weighing on currency

– BoJ Easing, need I say more?
– Yen weakness not helping trade much give territorial dispute with China
– Strong uptrend, keep buying USD/JPY on dips (or selling yen on rallies, depends how you want to say it)
– Incoming BoJ Gov in April could speed up open ended asset purchases

FOMC Voters 2013 Dove Hawk Scale

The Federal Reserve’s Open Market Committee changes every year and for 2013 in particular, the new makeup of the FOMC will be extremely important because this group will decide whether asset purchases should end in 2013. Gone are Lacker (the most hawkish member of the FOMC), Pianalto (a dove), Williams and Lockhart. Three doves and one hawk will be replaced with two uber doves (Evans and Rosengren), one moderate hawk (George) and one unknown (Bullard). What this implies is that the new voting members of the FOMC may not be as eager to phase out asset purchases this year as the prior committee.

Here is the updated FOMC Voters Dove Hawk Scale for 2013

These new members will have their first opportunity to vote on monetary policy at the January 25th FOMC meeting and here’s where they stand:

Openly Dovish
Chicago Fed President Charles Evans
Boston Fed President Eric Rosengren
NY Fed President William Dudley
Vice Chair Janet Yellen

Moderately Dovish

Fed Board Member Jeremy Stein
Fed Board Member Sarah Raskin
Fed Board Member Daniel Tarullo

Slight Lean towards Dovishness

Fed Chairman Ben Bernanke
Fed Board Member Elizabeth Duke
Fed Board Member Jerome Powell

Slightly Hawkish
Kansas City Fed President Esther George
St. Louis Fed President Bullard