Reading weekend commentary, you get a strong sense that many market watchers have called the bottom and expect a quick return to a low volatility environment. In our most recent Premium trades, there are 2 GBPUSD with 2 charts after Monday's GBPUSD trades hit their final targets . Full trades & charts are in the Premium Insights.
We doubt it. Periods of extreme swings in sentiment rarely end abruptly. For the moment, Bullard has calmed worries by adding a 'Yellen put' to markets but how much of a delay in the taper is now priced in? Unless some leaks slip from the FOMC that say otherwise, we suspect markets will put about an 80% probability on a taper delay by the time decision day rolls around.
The thing is, if the Fed disappoints, markets could go straight back to kicking and screaming -- perhaps worse.