The transition from the US to the Asian session, normally a time to watch grass grow, was anything but dull as Turkey stunned the markets by hiking their rates by 425bp. Traders had been expecting a hike in the 200bp range, so the magnitude of the move sent the Turkish Lira soaring across the board and seems to signal a strong commitment by the central bank to do whatever it takes to restore faith in their beleaguered currency. The resulting fallout appears to have emboldened the market as risk appetite returned with the Yen weakening and the antipodean currencies strengthening. It might have also made the FOMC's decision a bit easier.
The upcoming FOMC monetary policy announcement will be the last one for outgoing Chairman Ben Bernanke. He will be long remembered for introducing the phrase Quantitative Easing(QE) to the financial vernacular and, IF the US economy does indeed regain its luster, history will surely judge him favorably as the man most responsible for rescuing the American financial system.
Given that the US economy had been showing nascent signs of self sustainability and using the clarity that only hindsight can provide, it seems quite logical now that he would begin the process of ending what he started at last months meeting. This would have the dual effect of providing a smoother transition for his successor, Janet Yellen, and defining the alpha/omega of his tenure. It also stands to reason then that he would probably prefer to end his Chairmanship by continuing the process of reducing asset purchases by $10 Billion when they make their announcement at 2PM EST. This outcome appears to have been priced in, so any surprise will have the predictable effect of roiling the markets and make Bernanke's last official act a most memorable one.