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16 Jun 2013
Flash: Bernanke may be dovish but FOMC still set to taper - UBS
FXstreet.com (Barcelona) - Pro-USD bulls UBS suspect Bernanke may be dovish at this week's post FOMC press conference, with Mansoor Mohi-uddin, Head of FX Strategy at UBS Macro Research, saying Bernanke may stress that the Fed remains unlikely to start raising the Fed funds rate from zero until 2015.
Although the key focus will continue in the wording referring to potential cuts in the amount of assets the Fed purchases, where pricing appears to have been scaled back in recent weeks. Mohi-uddin thinks the Fed still needs another three to four months before considering such a move.
Mohi-uddin adds: "The Fed's new economic forecasts should give more insight into the likely timing of Fed tapering. If FOMC members lower their forecasts of America's unemployment rate further towards 7.0% by year end that will reinforce market expectations that the Fed will begin cutting the pace of its bond buying at the September 17-18 or October 29-30 FOMC meetings."
But as investors have already been cautioned to expect a dovish press conference from Bernanke, we think any downside to the dollar here is already largely priced. Instead, we expect investors will look through attempts to push back rate hike expectations and focus still on when the Fed will slow down its asset purchases.
Although the key focus will continue in the wording referring to potential cuts in the amount of assets the Fed purchases, where pricing appears to have been scaled back in recent weeks. Mohi-uddin thinks the Fed still needs another three to four months before considering such a move.
Mohi-uddin adds: "The Fed's new economic forecasts should give more insight into the likely timing of Fed tapering. If FOMC members lower their forecasts of America's unemployment rate further towards 7.0% by year end that will reinforce market expectations that the Fed will begin cutting the pace of its bond buying at the September 17-18 or October 29-30 FOMC meetings."
But as investors have already been cautioned to expect a dovish press conference from Bernanke, we think any downside to the dollar here is already largely priced. Instead, we expect investors will look through attempts to push back rate hike expectations and focus still on when the Fed will slow down its asset purchases.