The FOMC board members appear to be split down the middle as to the timing of reducing the US' quantitative easing policy. Half would like to see it start by the end of the year, and half not until sometime in 2014. The biggest hint towards the likely winner of that debate was in Ben Bernanke’s speech, where he reiterated that an unemployment level closer to the 6.5% level was needed and that he felt the current 7.6% level was ‘somewhat overstated’.
Once again, the glee with which the European markets have reacted to this perceived slowing of the tapering process has highlighted the different stages of the recovery cycle they are at in comparison to the US. An $85 billion monthly cash injection habit appears to be harder for European traders to drop than their US counterparts.
At the moment the only thing that looks likely to derail the European markets' enthusiasm are the continuing political problems that are plaguing the Portuguese government, and the subsequent distress this is causing their sovereign debt yields. If a compromise between all the parties can’t be found soon, a retest of that 8% level on their ten-year debt could be seen.