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18 Jul 2013
Flash: Bernanke rundown, US economy in focus – NAB
FXstreet.com (New York) - Recapping the previous session, equities had a somewhat muted positive reaction to Ben Bernanke’s speech overnight and other events, however US housing data was disappointing but some good earning reports, notably from Bank of America, helped the US market, notes Robert Henderson, an analyst at NAB.
The marquee event of the day, Ben Bernanke’s testimony to the House thematically turned out to be a re-run of his last speech on 10 July where he spelled out that the commencement of tapering of asset purchases was not the same thing as a tightening of policy – this caused a strong rally in equities.
According to Henderson, “While the recent themes have been similar, this speech provides much more color about the processes FOMC will go through in coming to its decisions. In particular it gave more emphasis to concerns about low inflation, below FOMC’s goal of 2%, suggesting underperformance here might mean no tapering.”
Moreover, “if the economy is worse than expected they might even increase the pace of asset buying. However, the bottom line remains that the economy is looking better and jobs creation is back close to pre-GFC levels so September looks likely to be the first ‘live’ meeting where tapering might begin. That said, if the data is softer, then Bernanke has signaled they might delay.” Henderson adds.
The marquee event of the day, Ben Bernanke’s testimony to the House thematically turned out to be a re-run of his last speech on 10 July where he spelled out that the commencement of tapering of asset purchases was not the same thing as a tightening of policy – this caused a strong rally in equities.
According to Henderson, “While the recent themes have been similar, this speech provides much more color about the processes FOMC will go through in coming to its decisions. In particular it gave more emphasis to concerns about low inflation, below FOMC’s goal of 2%, suggesting underperformance here might mean no tapering.”
Moreover, “if the economy is worse than expected they might even increase the pace of asset buying. However, the bottom line remains that the economy is looking better and jobs creation is back close to pre-GFC levels so September looks likely to be the first ‘live’ meeting where tapering might begin. That said, if the data is softer, then Bernanke has signaled they might delay.” Henderson adds.