Market Overreaction

The market has turned its sight to the members of the Fed after the latest employment numbers. A majority anticipates an early withdrawal of monetary stimulus and for that reason the dollar has strengthened against almost all of its peers.

Certainly employment data were better than expected, but still far away from employment levels that the Fed had set to slow down bond buying in the secondary market. Neither inflation is reason enough to think of this measure. On the other hand, other data related to growth still fail to take off convincingly. Specifically yesterday, the industrial production disappointed with a weak figure.

I will be watching what Fed members say, but I fear that, as on many other occasions, the market is anticipating too much. So the dollar index should correct the upward movement, and the EURUSD, if only for the moment, stop its losses.