The comment section remains focused on QE so I will just add a few more points to what I have already written today.
I favour a QE “lite” announcement for the reasons outlined earlier – I know not everyone agrees with this outcome but that is what makes a market.
There has been a lot of US Dollar short covering over the last fortnight – many are looking for another classic buy the rumour, sell the fact type move.
Many who have squared up are looking to get back into their US Dollar short positions. So a knee-jerk move back to 1.38 in EUR/USD or 98 cents in AUD/USD might bring out the buyers.
That said it is the equity reaction we perhaps should be looking for – a QE lite decision might be nasty for stocks so risk currencies might fall further than market anticipates.
All up there is a number of possible outcomes although Bernanke is not one to shock the market – I suppose all that is about as clear as mud. I am glad not to have a position.