Whither Europe’s Super-AAAs?
Wednesday clearly witnessed a more assertive Fed than expected. Even though Bernanke did his best to rein in expectations of any immediate changes, the prospect of tapering in the next six months is clear. The dollar’s rally amid 15- month highs in yields was not a surprise. However, the coming days will be more nuanced reaction as markets seek to differentiate between currencies against which a dollar rally is sustainable. The key determinant here will not be the Fed, but the policy differentials of individual central banks against the Fed. The Norges and SNB decisions today would be good places to start.
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