While tapering was the main topic of conversation of three FOMC member speeches yesterday, comments from St. Louis Fed President Bullard appears to have had the biggest impact. While the other two speakers remain well-known hawks, Mr. Bullard has been voting the party line this year. In his speech, he inched closer to switching sides suggesting that strong recent job reports have increased the odds of starting tapering sooner. More importantly, he suggested that if inflation falls, the Fed could pause tapering. This sent a signal to the street that the Fed remains aware of its dual inflation and employment mandate and will not sacrifice one for the other. These comments have had a dual effect on markets. The prospect that tapering could start as soon as this month’s meeting has sent QE fuelled stock markets around the world lower this morning. On the other hand, indications that the Fed could stop tapering if deflation became a risk or (implied) if the economy were to slow again has sent USD sharply lower and sending precious metals sharply higher. Energy commodities have also been gaining ground with US crude and gasoline climbing. Natural gas has been the biggest gainer today, with unusually cold temperatures and winter storms across much of North America boosting heating demand. In currency markets today, the resource group has been leading the charge for the most part including NZD, AUD and NOK. These markets have also been responding to better than expected Chinese retail sales and growing Chinese power generation, a sign of an improving economy. JPY and CHF have bounced back a bit as well from oversold conditions. GBP, CAD and SEK are slightly higher against the greenback but trailing their peers. Economic News Significant economic announcements released yesterday afternoon and overnight include: Australia NAB business confidence 5 same as previous Australia NAB business conditions (5) vs previous (4) China industrial production 10.0% vs street 10.1% China retail sales 13.7% vs street 13.3% China electricity generation 6.8% Italy GDP (1.8%) vs street (1.9%) France industrial production 0.0% vs street 0.3% France manufacturing production 0.7% vs street 0.2% Italy industrial output (0.5%) vs street (2.2%) UK industrial production 3.2% as expected UK manufacturing production 2.7% vs street 2.9% UK trade balance (£9.7B) vs street (£9.3B) Greece industrial production (5.2%) vs previous (1.8%) Economic reports due later today include: 3:00 pm GMT UK NIESR GDP estimate previous 0.7% Some of the meetings on implementing the Volcker Rule scheduled for today have apparently been postponed due to bad weather.

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