In his testimony at the Senate Budget committee this morning, Fed Chairman Ben Bernanke, resisted the temptation to day trade monetary policy on the back of Friday’s good employment data. Our sense is the global printing press’ and zero interest rates are starting to gain some real traction, which first shows up in the financial and commodity markets.
The new market narrative of 2012 is the power of zero (interest rates), the power of the printing press, LTRO2, etc. The macro swans of 2011 — PIIGS, U.S. and global recession risk, and China hard landing — have either flown the coop or have been drowned in central bank liquidity. The China hard landing scenario, political risk/reform fatigue in Europe, and middle east geopolitical risk still need to monitored closely, however.
Gold, which was clocked on the nonfarm payrolls data and fear of subsequent changes to U.S. monetary policy, is bouncing back after being reassured by Ben Bernanke. Interesting the Senate committee had no questions to Bernanke about revisions to current monetary policy on the improvement in the jobs data. Stay tuned.
(click here if chart is not observable)