Majority of Forex Pros Do Not Anticipate QE3

The general consensus among foreign-exchange professionals is that there will be no third round of quantitative easing. Bloomberg surveyed the professionals that attended its FX Summit in London last week and found that 65% believed that there would be no QE3. The Federal Reserve is set to complete its second round of asset purchases this month. The $600 billion dollar program has pushed the Fed's balance sheet to $2.79 trillion. Recent rhetoric from the Fed has indicated that there will be no QE3, despite sluggish economic growth. The Bloomberg survey may indicate that the market believes the Fed. In his speech to a group of bankers in Atlanta last week, the Fed's Chairman Ben Bernanke acknowledged the recent economic slowdown, but gave no indication that the Fed would undertake QE3. The president of the Federal Reserve Bank of Dallas—Richard Fisher—has stated that he would not support a QE3, as did Philadelphia's Fed President Charles Plosser. On Friday, noted economic commentator David Tepper appeared on CNBC and predicted that QE3 would not occur unless the S&P 500 dropped by several hundred points. Readers may want to take Tepper's comments seriously, as he was able to accurately predict QE2 last year. Given the Fed's strong rhetoric and Bloomberg's survey, if the Fed ultimately decides to implement QE3 it might catch the market way off guard. That could create some serious volatility if the Fed chooses to go down that road.