Week in FX Americas – Fed's Communication Skills Better Be Sharp

The market will be consumed by the Fed and what policy makers will have to say for themselves next week. Investors collectively have already done some significant pre-meeting asset price damage this week. The bleeding only happened to stop after investors took some comfort in a WSJ Fed watch report suggesting that any bond tapering would be gradual in nature and that rates would remain "low" for a considerable period of time.

A communication challenge remains for Ben and his policy-making cohorts. By now everyone should be aware that future Fed policy should undertake three distinct phases: tapering, pause and tightening. For many individuals the unknown variable is the length of time between each of the above phases. The market is expecting 'helicopter' Ben to press home the point next week that there will be a considerable amount of time between 'ending' (note, not tapering) QE and raising rates.

The Fed needs to be very transparent when highlighting the point...