As I have said before in the comment section under numerous articles in the past month or so, Federal Reserve Bank decided that the surge in the dollar exchange against other currencies, but most importantly the Euro, can not sustain FEDs long term plans concerning the recovery of the US economy. In a statement issued late this night FED announced re-opening of swap facilities which will take the strain off the USD. Full statement can be read beneath.
Release Date: May 9, 2010 For release at 9:15 p.m. EDT In response to the re-emergence of strains in U.S. dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary U.S. dollar liquidity swap facilities. These facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers. The Bank of Japan will be considering similar measures soon. Central banks will continue to work together closely as needed to address pressures in funding markets. Federal Reserve Actions The Federal Open Market Committee has authorized temporary reciprocal currency arrangements (swap lines) with the Bank of Canada, the Bank of England, the European Central Bank (ECB), and the Swiss National Bank. The arrangements with the Bank of England, the ECB, and the Swiss National Bank will provide these central banks with the capacity to conduct tenders of U.S. dollars in their local markets at fixed rates for full allotment, similar to arrangements that had been in place previously. The arrangement with the Bank of Canada would support drawings of up to $30 billion, as was the case previously. These swap arrangements have been authorized through January 2011. Further details on these arrangements will be available shortly.
Trade accordingly or do not trade at all; your choice, but the madness we have witnessed in the FX market shortly after the EMU members announced a 720 billion euros rescue package, and basically broke their own law by announcing sovereign bond buybacks in the secondary market and thus insured a massive QE program, will be repeated not on a daily basis, not on an hourly basis but on a tick basis. Well I can not say that this was unexpected but what does surprises me how short of a time [an hour or so] took the FED to announce the re-opening of swap facilities and how apparently well coordinated was the effort among the Banks. Expect equity futures to trade significantly higher and for the DOW to brake 12k in a week or so. Apparently when nothing else is left hyperinflation is left since nothing else matters except constant 10 second up ticks on all major global equity indexes every day, every year until time itself can not, for much longer, endure the constant rise in the equities. Enjoy what is left of your purchasing power and do not forget to load up on gold.