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17 Jul 2013
Bernanke's testimony: Potential USD performance
FXstreet.com (Barcelona) - Bernanke's testimony on Wednesday, for the sake of volatility lovers, will hopefully shed some more lights into the thinking process behind the Federal Reserve Board.
Members of the Fed appear to be evenly distributed between the dove and hawk camp, on one side being the Bernanke, Yellen and other doves, while on the other half a more hawkish view has been adopted, as clearly stated in the last monetary policy minutes statement, which notes "About half [of the FOMC who] indicated that it likely would be appropriate to end asset purchases late this year.”
If last week's speech is any indication on how things may play out this Wednesday, Bernanke's appearance on the Q&A round following his presentation on 'A Century of U.S. Central Banking' was characterized by a more personal opinion on the 'state of policy affairs', while the pre-communiques, have had to be more consensual amid the approx 50/50 split between hawks/doves.
In view of Adam Button, Editor at Forexlive: "Last week, Bernanke was once again speaking for himself when he said both sides of the Fed’s mandate are saying that they need to keep being accommodative. They’re more worried about risks to the financial system from QE than inflation. Bernanke’s published statement is likely to speak for the entire FOMC, which would give it a more hawkish tilt and help the dollar. His Q&A will likely reflect more of his personal feelings and hurt the dollar."
The bets towards a taper in September are no longer that clear, as well reflected by the constant stumble of the U.S. Dollar since Bernanke's last week bombshell.
At this point, it is all about the timing of the taper. The recent decline in the U.S. Dollar on the lead-up to today's event indicates a lesser conviction to price the 'Septaper', and with the U.S. economy not showing significant improvements as of late, that, according to Button, "give Bernanke the ammunition to push the taper a few more months into the future."
If the market interpretation from Bernanke's tone is in line with Button's view, there seems to be still some room for the U.S. Dollar to give back to the market more gains as the taper in September proves to might have been a fatal assumption.
Members of the Fed appear to be evenly distributed between the dove and hawk camp, on one side being the Bernanke, Yellen and other doves, while on the other half a more hawkish view has been adopted, as clearly stated in the last monetary policy minutes statement, which notes "About half [of the FOMC who] indicated that it likely would be appropriate to end asset purchases late this year.”
If last week's speech is any indication on how things may play out this Wednesday, Bernanke's appearance on the Q&A round following his presentation on 'A Century of U.S. Central Banking' was characterized by a more personal opinion on the 'state of policy affairs', while the pre-communiques, have had to be more consensual amid the approx 50/50 split between hawks/doves.
In view of Adam Button, Editor at Forexlive: "Last week, Bernanke was once again speaking for himself when he said both sides of the Fed’s mandate are saying that they need to keep being accommodative. They’re more worried about risks to the financial system from QE than inflation. Bernanke’s published statement is likely to speak for the entire FOMC, which would give it a more hawkish tilt and help the dollar. His Q&A will likely reflect more of his personal feelings and hurt the dollar."
The bets towards a taper in September are no longer that clear, as well reflected by the constant stumble of the U.S. Dollar since Bernanke's last week bombshell.
At this point, it is all about the timing of the taper. The recent decline in the U.S. Dollar on the lead-up to today's event indicates a lesser conviction to price the 'Septaper', and with the U.S. economy not showing significant improvements as of late, that, according to Button, "give Bernanke the ammunition to push the taper a few more months into the future."
If the market interpretation from Bernanke's tone is in line with Button's view, there seems to be still some room for the U.S. Dollar to give back to the market more gains as the taper in September proves to might have been a fatal assumption.