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17 Jul 2013
Flash: All eyes on Bernanke, again - BAML
FXstreet.com (London) - Alexandra Fletcher, BofA Merrill Lynch Global Research, said today’s semi-annual testimony, by Fed Chairman Ben Bernanke, has become the most important event for financial markets this week.
He continued to ay that overnight options in FX are around 2.0-2.5 vol higher. Given this perceived elevated level of risk, it is not surprising that investors are scaling back long USD positions this week, ahead of the testimony. "Bernanke has already laid out a clear path for the Fed, which is very much data dependent. If data are in line with expectations, tapering will start later this year (investors currently expect a September start) and QE will then end by the middle of 2014". He feels that interest rates will not be raised until much later. "We expect this to be repeated in the testimony, alongside highlighting that low inflation and the evolution of data could delay/prolong any Fed exit".
He continued to ay that overnight options in FX are around 2.0-2.5 vol higher. Given this perceived elevated level of risk, it is not surprising that investors are scaling back long USD positions this week, ahead of the testimony. "Bernanke has already laid out a clear path for the Fed, which is very much data dependent. If data are in line with expectations, tapering will start later this year (investors currently expect a September start) and QE will then end by the middle of 2014". He feels that interest rates will not be raised until much later. "We expect this to be repeated in the testimony, alongside highlighting that low inflation and the evolution of data could delay/prolong any Fed exit".