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Fed fiesta

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  • We have a Fed focus to the day ahead, with both the release of the minutes from the last FOMC meeting (the one which sparked all the tapering comments) and a speech by Ben Bernanke discussing a century of central baking (central banks have been around more than a century, just not in the US).
  • We believe that the minutes will signal that the FOMC believes the economy warrants a process of at least stabilising the Fed's balance sheet relative to GDP with a reduction in the bond buying program over the end of this year.
  • The Euro area is of course going in the other direction, with hints of accommodation for more than a year from Asmussen of the ECB yesterday (before his remarks were "clarified" by ECB officials). A credit rating agency downgraded Italy from something to something else no one really cares about.
  • China's exports and imports were weaker than expected. The export weakness was at least half due to greater accuracy in the reporting of the data (so economically not a weakening at all), but half was a more valid adjustment. Imports reflected lower commodity prices and softer domestic demand.

Listen to the audio version of this briefing.