The WSJ’s inimitable Hilsenrath has made it clear that the Fed is about to act.
The onus is now on the data to stop them from easing
Many officials appear increasingly inclined to move unless they see evidence soon that activity is picking up on its own
And the debate is no longer if it is how and when
Amid the recent wave of disappointing economic news, conversation inside the Fed has turned more intensely toward the questions of how and when to move. Central-bank officials could take new steps at their meeting next week, July 31 and Aug. 1, though they might wait until their September meeting to accumulate more information on the pace of growth and job gains before deciding whether to act.
Interestingly, the story has lots of space devoted to options for driving fed effective lower. Who said eurodollars were expensive?
This should be good for global duration, and good for the AUD.
If the pushes the AUDUSD back to 1.12 on the cross, i am pretty sure the damage caused will boost the unemployment rate, push down on inflation, which will eventually bring the RBA back to ease policy.
But that will all take time – assuming QE3 and a stronger AUD i still think the next realistic window for a cut is November (with the usual EU explosion caveats).