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Week In FX Europe: Market Cannot Side Step All Fed Rhetoric

ByDean Popplewell
Published 06/30/2013, 02:01 AM
Updated 07/09/2023, 06:31 AM

Investors have had to side step month-end, quarter-end and mid-year portfolio adjustments. However, they could not escape some compelling Fed rhetoric on the final Friday of June. Since helicopter Ben’s failed attempt at transparency at last weeks post-FOMC press conference there have been no fewer than five Fed speakers attempting to clarify his points.

The plethora of Fed speakers have gone out of their way to point out that the market has got it wrong with the rate outlook. Fed’s Fischer, Dudley, Powell and Lockhart have used adjectives like “feral hog’s” and “cold turkey” to describe some of the out-of-sync rate movements that investors have endured over the past nine-day’s.

Have some members already decided on September? Fed governor and voting member Stein happened to reignite the QE tapering market anguish on Friday when he argued that the central bank should be “clear that in making a decision, in say September, it will give consideration” to the economic progress made since the start of easing. Comments like this suggest a lowering of the bar for a possible QE tapering in September. US treasuries immediately backed up on this comment.

Investors should be expecting more Fed speakers to try and stay to their script and calm market fears over the rate path. It is difficult for investors to wholly understand the Fed’s message in its entirety. Given the basis upon which the central bank has expanded its balance sheet, the current reasons to taper/end QE so soon is certainly “a large pill to swallow.” Next week’s NFP release will play a pivotal role – a strong US payrolls number could easily send markets back into panicked position reduction, in other words another tailspin.
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