Interest rates could be going higher sooner rather than later. On Monday Ben Bernanke sent world markets a clear message that the U.S. would strongly resist rising inflation.
His remarks represent "a notable sharpening of the inflation rhetoric compared with his remarks last week," said Steve Malyon, senior currency strategist at Scotia Capital in Toronto, in a research note to clients. "The implied odds that the Fed tightens rates as early as August now outweigh the odds they leave rates unchanged."
Meanwhile, traders are pricing in the prospects of the Fed lifting its fed funds target rate by half a percentage point by October and by three-quarters point by year-end.
”We’ve fixed the systemic damage and now we have to fix the pain that comes from fixing it,” says Tim Seymour. “The Fed has to be concerned about inflation. And I see no reason why they can’t hike rates in this economy.”
How would you trade?
I would avoid gold, Guy Adami says.
I’d short the pound via the CurrencyShares British Pound Ster. Trst and the euro with the CurrencyShares Euro Trust , adds Karen Finerman.