What's not to love about cheaper oil, gasoline, imported BMW's or that summer trip to Rome?
While the answer for most people is something along the lines of "more, more, more," the reaction at the Fed the dollar's sudden surge to a 4-month high is likely to be one of much greater concern.
"At the end of the day, a stronger dollar does have consequences," says Peter Kenny, managing director at Knight Capital in the attached video, referring to the pros and cons as "the perfect Catch-22."
As he, and surely the FOMC sees it, the dollar's 3-week surge hurts exports, manufacturing and jobs, and that, he says, is where the Fed will be forced to step in and take action, "to avoid slipping back into recession."
Of course, you'll never hear the Fed or the Treasury or any comparable government entity saying specifically that they support a weaker dollar, but you had better get ready to hear all sorts of things that suggest the price of that strong dollar is hurting U.S. growth.
As Kenny puts it, "a stronger dollar takes that competitive advantage away (in industrial production and manufacturing) and would have a very direct and negative impact on GDP expansion."
As much as this increases the likelihood of further easing if the uptrend persists, Kenny does not see a preemptive strike happening prior the Fed's next scheduled meeting on June 19th and 20th. In the meantime, if the crisis in Europe continues to worsen, a multi-bank effort like the one implemented by 6 central banks in November, could happen to be disclosed at any moment.