Poor Angela Merkel – being completely unable to do any monetary intervention without incurring the anger of a hawkish population, the chancellor is limited in her ability to intervene in the FX market. Which is why her most recent attempt to generate some Euro weakness appears to have had a diametrically opposite effect. Reuters quotes the chancellor as having said that recent euro weaknesses have not been overcome, and have been merely shielded for now, using EU and IMF rescue packages. In other words please sell the EUR. She has also sees major risk of protectionism, and supports the Sarkozy initiative to put currencies on the G20 agenda. Of course, all this FX warfare-lite is for nothing, as the market is invigorated by a Medley Global Advisors report that a Fed announcement to “aggressively” buy bonds is imminent. At least we now know that even if it sucks at everything else, the Fed is great at leaking stuff to the highest bidder. Regardless, first of all, this is a total bullshit plant. And second, just how is that news again? We have long claimed the Fed will have no choice but to buy at least $1.5 trillion. Even permabull Jim O’Neill said so on Tom Keene last night. But yes, lets price in QE2 a little more with some worthless rumor. After all the plunge in BAC must be halted at all costs.
Yet the immediate goal of fooling several thousand Japanese housewives, and some momentum chasing computers, has been accomplished.
Originally published at Zero Hedge and reproduced here with permission.