USD rules as Bernanke crash lands the helicopter
City Index June 20, 2013 2:07 PM
<p>The Fed Chairman has sent stocks and bonds crashing after Bernanke said the US Central Bank will start taking their foot off the QE pedal. […]</p>
The Fed Chairman has sent stocks and bonds crashing after Bernanke said the US Central Bank will start taking their foot off the QE pedal. Investors ran for cover after the Chairman said the Fed could start winding down its $85 billion a month bond buying programme towards the end of the year and have the entire programme completed by the summer of 2014. It added the usual comment that this is of course dependant on the US economy continuing to perform robustly.
The key takeaways from the statement are exactly what the market had been looking for: the Fed’s policy is no way pre determined and is dependant on incoming data and the economic outlook, and the Fed will continue to buy assets at $85 billion per month as long as the unemployment rate is above 6.5%. Purchase could taper whilst the rate was around the 7% level as long as solid economic fundamentals supported further growth in the labour market.
In other news the HSBC China manufacturing PMI dropped to a nine-month low of 48.3 from 49.2 in May, adding further pressure to commodities and the AUD, with the latter sitting vulnerably on the 0.9225 support.
Today will be all about the dollar as I expect the market to start re-instating the dollar longs that were reduced going into the Fed meeting. The data today consists of European PMI data and UK retail sales with the US session bringing us further housing data, weekly jobless claims and the Philadelphia manufacturing survey. Keep an eye on the SNB meeting at 8.30am this morning as although no policy change is expected, there is speculation of a very dovish statement keeping the negative rates debate open.
Supports 1.3230-1.3175-1.3100 | Resistance 1.3300-1.3350-1.3410
Supports 96.15-95.75-94.80 | Resistance 98.00-98.70-99.25
Supports 1.5420-1.5375-1.5250 | Resistance 1.5500-1.5565-1.5615
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.