11 Jul 2013
Flash: Fed view unchanged from before, mid-2014 in focus? – Westpac
FXstreet.com (New York) - The USD was hammered across the board as the FOMC minutes were viewed as a little more dovish than expected, followed by Fed chairman Bernanke’s Q&A session, upsetting the consensus view that the June jobs data reinforced the Fed’s plan to start reducing stimulus from September, notes Sean Callow, a Global FX Strategist at Westpac.
There is plenty of room for debate over both the minutes (which showed the usual wide range of views) and whether Bernanke was really changing his tune on the likely path of policy. However, markets seemed to focus on his view that the job market is probably weaker than the unemployment rate indicates and that highly accommodative monetary policy for the foreseeable future is what is needed for the U.S. economy.
“Our sense is that the Fed doesn’t hold a very different view from the 19 June press conference where Bernanke outlined a likely path of starting to reduce QE later this year, completing the process by mid-2014 – this should be USD-positive.” Callow adds. However, the knee-jerk reaction was enough to trigger a flurry of stop loss orders as a market very long USD was squeezed.
There is plenty of room for debate over both the minutes (which showed the usual wide range of views) and whether Bernanke was really changing his tune on the likely path of policy. However, markets seemed to focus on his view that the job market is probably weaker than the unemployment rate indicates and that highly accommodative monetary policy for the foreseeable future is what is needed for the U.S. economy.
“Our sense is that the Fed doesn’t hold a very different view from the 19 June press conference where Bernanke outlined a likely path of starting to reduce QE later this year, completing the process by mid-2014 – this should be USD-positive.” Callow adds. However, the knee-jerk reaction was enough to trigger a flurry of stop loss orders as a market very long USD was squeezed.