Back
18 Sep 2013
Flash: Only QE taper of about $20bn would boost USD - Westpac
FXstreet.com (Barcelona) - The FOMC’s two day meeting concludes at 2pm NY this Wednesday, with the statement, new forecasts and Chairman Bernanke’s press conference (30 min later), notes Sean Callow, FX Strategist at Westpac.
Key Quotes
"Having publicly mused about a reduction in bond purchases since May’s testimony and not backed off the suggestion of “later in the year” despite some lacklustre data in recent weeks, it seems highly likely that this meeting will see a reduction in the scale of QE, from the current $85bn/mth ($1 trillion annualized)."
"Fed officials have indicated that they would prefer to make such a move at a meeting with a press conference, which means if they pass this time then attention will move to 17-18 Dec, which would have the added complication of being the likely time of nomination hearings to confirm the next Fed chair, hardly ideal."
"Expectations for QE ‘tapering’ look to have been reduced since the poor Aug jobs report but many big Wall Street names continue to expect -$10bn from Treasuries (to $35bn) and in some cases an additional -$5bn from MBS (also to $35bn). This is probably consensus in terms of market positioning, with some leaning to -$10bn in Treasuries only."
"If accompanied by rhetoric from Bernanke to try to keep a lid on yields (acknowledging the softness of recent data) then USD/majors should emerge weaker. Only a QE reduction of about $20bn would boost USD."
Key Quotes
"Having publicly mused about a reduction in bond purchases since May’s testimony and not backed off the suggestion of “later in the year” despite some lacklustre data in recent weeks, it seems highly likely that this meeting will see a reduction in the scale of QE, from the current $85bn/mth ($1 trillion annualized)."
"Fed officials have indicated that they would prefer to make such a move at a meeting with a press conference, which means if they pass this time then attention will move to 17-18 Dec, which would have the added complication of being the likely time of nomination hearings to confirm the next Fed chair, hardly ideal."
"Expectations for QE ‘tapering’ look to have been reduced since the poor Aug jobs report but many big Wall Street names continue to expect -$10bn from Treasuries (to $35bn) and in some cases an additional -$5bn from MBS (also to $35bn). This is probably consensus in terms of market positioning, with some leaning to -$10bn in Treasuries only."
"If accompanied by rhetoric from Bernanke to try to keep a lid on yields (acknowledging the softness of recent data) then USD/majors should emerge weaker. Only a QE reduction of about $20bn would boost USD."