This is a great time to trade currencies because we are getting true differentiation across central bank policies. Enough of the old 2% inflation target stuff followed by all central banks at the same time.
Viva la difference because this means trends. It also means that policy will have to shift over time which create turning point opportunities.
The Fed may be shifting from a strong Quantitative Easer to a central bank which is starting to show concerns for its actions. Right now the Fed is still buying $85 billion a month, but with the belief that there is some discussion in its minutes about alternatives, the dollar has had a strong upward trend.
The BOJ is being forced into "Abenomics" and has shown a nice decline. If this is confirmed with stronger buying of assets, the weakening trend will continue.
The BoE has mixed vote on more quantitative easing but New Governor Mark Carney is a dove. Maybe not a nominal GDP guy, but MPC is still going to focus on an easing strategy.
The ECB has shown more of mixed record. They have different problem where credit is needed in the periphery and not in the core. With slower growth, we can see more activity to expand credit in tight markets.
Some of the other G7 have stuck to existing policies but we are starting to see movement in merging markets in response to growth shortfalls. Asia is worried about Japan and will start to differentiate their policies. Brazil has a concern about inflation. Commodity currencies have concerns about an end to the commodity cycle. Australia is worried about further increase in it real exchange rate and the impact on the non-mining sector.
2013 will be the year of monetary policy differentiation.
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