20 Nov 2013
Flash: Fed Bernanke rates low for longer but taper coming - RBS
FXstreet.com (Barcelona) - As Greg Gibbs, FX Strategist at RBS notes, Fed Bernanke’s speech in Asia reinforced the idea that "the Fed’s ultra low rates and forward guidance policy is expected to remain in place potentially long after the Large Scale Asset Purchase (LSAP) plan has been tapered and to re-emphasis the unemployment threshold of 6.5% is not a trigger."
Key Quotes
"The speech does not give a clear benchmark for when tapering begins. It still depends on a range of data, the most important of which is the labour data. Labour data has further improved since the Sep/Oct meetings, therefore taper looks more likely."
"The biggest reason not to taper appears to be fiscal uncertainty. Perhaps therefore the Fed will continue to wait for the fiscal deadlines in Jan/Feb to pass. But tapering is a risk in Dec."
"The speech is relatively neutral for the USD. Perhaps at the margin supportive in that it does suggest that the Fed is not far from deciding to begin tapering, and is placing more emphasis on rates and policy guidance. The prospect of taper may keep EM and commodity currencies on edge."
"The prospect of low long term rates for some time should limit upside for the USD. However, this appears to be well understood, providing little scope for yields at the front end of the curve to fall much."
Key Quotes
"The speech does not give a clear benchmark for when tapering begins. It still depends on a range of data, the most important of which is the labour data. Labour data has further improved since the Sep/Oct meetings, therefore taper looks more likely."
"The biggest reason not to taper appears to be fiscal uncertainty. Perhaps therefore the Fed will continue to wait for the fiscal deadlines in Jan/Feb to pass. But tapering is a risk in Dec."
"The speech is relatively neutral for the USD. Perhaps at the margin supportive in that it does suggest that the Fed is not far from deciding to begin tapering, and is placing more emphasis on rates and policy guidance. The prospect of taper may keep EM and commodity currencies on edge."
"The prospect of low long term rates for some time should limit upside for the USD. However, this appears to be well understood, providing little scope for yields at the front end of the curve to fall much."