In an interview Monday morning, Chicago Fed Reserve President Charles Evans (a voting member) continues to push for continued monetary stimulus, reiterating that policy makers would probably require a "couple" more months of U.S. jobs data before deciding to pare back on the $85b a month bond-buying program currently in place.
The Fed's monetary stimulus program has created no inflationary pressures, nor an asset bubble. Corporate earnings have been strong, and a good enough reason to support an improving stock market, even though to some, current record benchmarks look a tad expensive.
From his own viewpoint, Evans believes that any move to taper at the December FOMC meet "will be pretty tough." The obvious reason, which has been well documented by Bernanke and his fellow policy cohorts, is the ongoing "fiscal drama" being played out in Washington - the U.S. debt ceiling debacle has only been suspended, not dealt with under their "kick the can policy."
Consumer spending still needs to play a bigger role. "If various actors in the economy stepped back and let the business community really take hold and consumers, too, we could see a big expansion in growth and we could pull back that much more quickly" according to Evans.
Dollar direction has been influenced by the market's interpretation of the Fed's timing to taper. The recent U.S. partial shutdown has many revising U.S. growth numbers for the remainder of 2013 and even next year. The dollar's collapse across the board has been trading in tandem with delaying the timing to taper. Weaker projected growth requires ongoing fiscal stimulus. However, tomorrow's extraordinary non-farm payroll release is capable of beating expectations -- if so, it could easily reverse, partially or all, the dollar's slide experienced over the past-five trading sessions.
For now, consolidation near currency highs (dollar lows) takes hold as market awaits tomorrow's release of September's NFP report. Option expiries and stop losses will most likely drive the limited interest in the New York market. Topside EUR offers continue to remain into 1.3710 with big stop losses just above may become more attractive if EUR dips remain somewhat limited.
Market consensus is looking for an NFP print of +180k with an unchanged unemployment rate at +7.3%. Any kind of a shortfall will put the brakes on the Fed to temper taper - causing extra pressure for the USD and support for the equity market.