This month’s Philadelphia Fed index will have an important impact on currency-market sentiment, especially as there will be powerful risk-appetite ripple effects and potentially important implications for Fed policy. The immediate impact of a weaker than expected figure would be a further deterioration in risk appetite and defensive dollar demand against European currencies with EUR/USD heading for the 1.40 area. The medium-term impact could be to push the Fed closer to additional quantitative easing. In 2010, the Philly Fed index weakened from a high of 21.4 in May to -7.7 in August. At the August FOMC meeting, the ... (full story)