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23 May 2013
Flash: Bernanke Dovish, no near term Tapering - BBH
FXstreet.com (Barcelona) - Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman notes that during his testimony yesterday, Bernanke's prepared remarks were as dovish as he had expected.
He notes that the Fed Chairman cautioned against premature tightening in the face of what he called a substantial drag from fiscal policy. Chandler adds that he noted that the labor market despite recent improvement and in this context, his reference to inflation expectations being anchored, indicates he sees little pressure to ease up on the accelerator. Further, he feels that Bernanke seems more concerned about the falling price pressures than several other Fed officials who have spoken recently. He continues to note that Bernanke has given the hawks (those who want to slow the Fed's purchases as early as next month) little succor. He warned that too early of of a move would not only lead to a counter-productive increase in rates, but would also pose a threat to the economic recovery and may cause inflation to fall further.
Chandler notes that the dollar has generally eased against both the major and emerging market currencies. The stock market has extended its gains and US Treasuries have rallied with the 10-year yield moving back below 1.90%. Further, he sees that the euro is at a 6-day high and a move above $1.30, a 50% retracement of the euro's drop from $1.32 on May 8, would target $1.3240, where the euro bears may chose to make a stand. He writes, “Sterling has recovered somewhat, but is struggling to stay back in yesterday's range. The dollar remains firm against the yen, but divergences in the intra-day momentum studies warn of the risk of further consolidation.”
He notes that the Fed Chairman cautioned against premature tightening in the face of what he called a substantial drag from fiscal policy. Chandler adds that he noted that the labor market despite recent improvement and in this context, his reference to inflation expectations being anchored, indicates he sees little pressure to ease up on the accelerator. Further, he feels that Bernanke seems more concerned about the falling price pressures than several other Fed officials who have spoken recently. He continues to note that Bernanke has given the hawks (those who want to slow the Fed's purchases as early as next month) little succor. He warned that too early of of a move would not only lead to a counter-productive increase in rates, but would also pose a threat to the economic recovery and may cause inflation to fall further.
Chandler notes that the dollar has generally eased against both the major and emerging market currencies. The stock market has extended its gains and US Treasuries have rallied with the 10-year yield moving back below 1.90%. Further, he sees that the euro is at a 6-day high and a move above $1.30, a 50% retracement of the euro's drop from $1.32 on May 8, would target $1.3240, where the euro bears may chose to make a stand. He writes, “Sterling has recovered somewhat, but is struggling to stay back in yesterday's range. The dollar remains firm against the yen, but divergences in the intra-day momentum studies warn of the risk of further consolidation.”