Tuesday, April 26, 2011

Wednesday Could Be Scary Day

Wednesday April 27th could be the scariest day of the quarter – in fact the whole year.
As you know by now, on Wednesday Federal Reserve Chairman Ben Bernanke will make history - by holding the first ever press briefing following a monetary policy decision by the central bank.


This change in the Fed’s communication with the markets alone is enough to give investors the jitters, but the nervousness is compounded by growing signs if inflation.


Not only will the Street be listening carefully to every word, but investors will also be watching Bernanke’s every move, looking for hidden meaning in his posture, facial expressions and more.

Will Bernanke acknowledge the inflation and take a more hawkish tone or ignore it and remain dovish.

Here’s what the Fast traders expect.

BERNANKE STAYS DOVISH ON INFLATION
Brian Kelly says “when you look at some of the inflation gauges that Bernanke looks at, there aren’t any massive increases.” That leads Kelly to speculate that “he won't change a thing," or he'll remain dovish.

Tim Seymour largely agrees. “I don’t see any reason for the Fed not to re-affirm what they’ve been doing for quite some time.”

If Kelly and Seymour are right, a dovish scenario would suggest the dollar remains weak and that should be bullish for commodities.

BERNANKE TAKES MORE HAWKISH TONE
Andrew B. Busch of BMO Capital Market is on the other side. He thinks we could hear Ben Bernanke grow incrementally hawkish.

Don't expect anything big, but that's not to say something small won't be market moving.

As an example, Busch thinks the Street would consider it hawkish if the Chairman stops saying things like extended period in conjunction with interest rates.

And Busch adds there's an outside chance Bernanke puts the fear of God into the marketplace.

If he's right, the comments could spook the markets. Investors would worry it's an early sign that the Fed’s taking it’s foot off the 'accelerator' in its attempt to stimulate the recovery.

http://www.cnbc.com/id/42764271

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