Fed’s Lockhart: Go slow on exit strategy

Atlanta Fed president Lockhart is taking a much more relaxed approach to winding up the extraordinary intervention the Fed has undertaken over the last year, year-and-a-half. He sees no need for a comprehensive exit strategy yet and says rates should stay low for a long time. He says fears of the Fed’s huge balance sheet stoking inflation fears are exaggerated (I agree).

Plosser was similarly inclined last night. Looks like a game of good Fed, bad Fed.

US equities have taken a big leg lower in early trade, down nearly 1% after the weak Chicago PMI. This suggests risk aversion may keep EUR/USD somewhat offered, though be mindful of dollar-negative month-end flows to come.