A wise man once said that those who fail to learn from history are destined to repeat it, and that saying is not lost in the world of forex. And so Mr. Churchill, we will move forward and spread today's news with the strong anticipation that everyone who remembered the previous lesson will jump up and down with hands raised hoping to tell traders what to do this time.
In case you've taken a break from the news, the big thing that happened recently was the Fed'600 billion USD quantitative easing program, which increased the supply of the US dollar in order to purchase (remove) more US bonds from the market. The banks that sell these bonds back to the government have more money to lend, and the economy is rewarded with lower interest rates and better lending terms.
The Feds like to tout the benefits of this quantitative easing by stating that it will stimulate spending and increase employment opportunities, however, an identical move less than a year ago failed to do either. Those who choose to side with the "learn from history" lesson are warning against the threat of hyperinflation that injecting money causes, while the Feds tell us not to worry. Sorry, but we've been worrying so long it's almost impossible for us to stop now, especially since the last injection (the one that did nothing) was twice the amount of this one.
In the end, businesses will pass the effects of these moves on to consumers that are already struggling to keep up (most are unaware of what's going on or why, and it seems the Feds like it that way). In anticipation of a weaker US dollar we suggest bullish buying for now, unless history completely defies…well, history.
