Jack H. Barnes is a former trader and hedge fund manager who blogs at jackhbarnes.com
In a couple of days, The Bernanke is going to walk up to a podium and pontificate to the American people via the huddled & gathered pundits, about the status of the US economy. This will be the first official public Press Conference of the office of the Chairman. You almost have to ask yourself, what is he going to announce that requires a change in the 95+ year communication path between the Central Bank and its people.
It was only a few years ago when the FOMC used to hide behind a 5 year window of information black out. That was an era when the FED used to change rates in secret and left it to the market to guess what the new rate was. Today, we get FOMC minutes a couple weeks later.
The Chart on the right, shows the DXY since Jan 2009. History loves to rhyme, even if it doesn’t quit repeat itself. The chart also shows how “massaged” the chart really is. A real random walk down FX street would have jagged edges of regular trading in the tape. However when you look at the last few months of the DXY it doesn’t show this type of action.
In fact, I am also willing to guess that the very smooth action in the last part of the chart was caused by direct Federal Reserve market actions verses China.
The value of the US dollar is” the Bernanke” responsibility. Next week, he will be facing his fellow people and explaining his actions in the first Press conference between the Chairman and his people. Real transparency is always a good thing, however standing in front of 315,000,000 people and explaining to them that you flushed the buying power of their currency down the toilet to protect international bankers, is going to be interesting. Unless the Bernanke expects to live in Patagonia after his next tour, he will have to live with his actions in this country long after he joins the rest of the retired Chairman’s as talking pundits.
The US has exported enough inflation to China, that the breaking point on the Yuan ~ Dollar is arriving. The strikes in the Shanghai port have started to impact shipping plans for exporters. If it continues, or is a true sign of the will of the Chinese people, it is the communist who are riding the dragon.
It is the Bernanke who is poking the dragon with a sharp stick called Inflation. The Dragon is stirring.
The real question is if China is ready for a stronger Yuan. Either on its own, or via a bottoming action in the US dollar. Either of which could squeeze the last % out of Chinese export profit margins.
If things are as I think they might be, it will be the Chinese who are most interested in what the Chairman “publicly” says about future expectations of inflation. After all, it’s the Chinese people who are rioting in the streets. It is their dragon that is growing restless.
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