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Hardy on tapering and a "complacent" market
The US Federal Reserve is bound to say something on tapering when its two day meeting ends on December 18th, but what? John Hardy, Saxo Bank's Head of Forex Strategy, says he'll be very surprised if there are any shocking developments. He does warn, however, there's a degreee of complacency in the markets and that is a potential worry.
The Fed spends USD 85 billion a month on asset purchases and so called "tapering" of that stimulus has been expected to start for some time as the US economy improves. John says the markets have got used to the talk and haven't taken in the full potential consequences of a withdrawal of monetary support. The market is "lacking in fear", he says.
John explains that if there's excess complacency, that means the dollar is too weak and risk appetite is too strong. Even if the Fed is more dovish than expected, we could get a small knee-jerk reaction, another piling on of risk assets and the dollar could weaken another notch or two.
01:26 minutes
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