Intraday Market Thoughts

Bernanke Brings the Volatility, BOC Still Talking Hikes

by Adam Button
Jul 17, 2012 23:53

The Fed Chair offered no indication he is ready to initiate QE3 in testimony Tuesday, sparking a sharp rally in the US dollar that was later reversed. The Australian dollar was the top performer while the yen lagged. Latest developments in latest Premium Insights on EURUSD, EURJPY, AUDUSD gold, oil and silver are found below.

Bernanke reiterated the recent line that the Fed is prepared to act but he declined to specify any details. The impression was that the Fed will wait and see how the economy develops beyond the Aug 1 FOMC meeting. That will give the two more employment reports to ponder. If theyre weak, the Fed will almost certainly take action.

The disappointment of no promise to ease immediately was reflected in a broad USD rally. The euro fell nearly a cent to 1.2188, cable fell to 1.5500 and gold fell $20 to $1571.

Bernanke remained downcast throughout his testimony, saying indications point to Q2 growth below 2%. After the knee jerk reaction, the US dollar quickly began to lose ground, eventually giving up the entire move with the euro rebound to 1.2290, cable to 1.5650 and gold to $1590.

Economic data pointed to continued low inflation with June CPI at +1.7% y/y, as expected. A positive surprise came with a jump in the NAHB home builder sentiment survey to 35 from 30.

The other main event of the session was the Bank of Canada decision. Policymakers held rates at 1.00% as expected but in a surprise, officials did not back down from the promise to hike rates if conditions improve. The BOC had been expected to shift to a neutral or dovish stance.

The upcoming session features the Bank of Japan June 14-15 meeting at 2350 GMT. At 0030, Westpac releases the Australian leading index for May and at 0130 GMT, China releases June property prices for 50 cities. This number rarely moves markets but its a tremendous way to glean insight into the market.

Politics in Japan may also be in focus after Kyodo reported that another 3 politicians have resigned from the ruling DPJ in addition to the 49 who recently quit to protest the consumption tax. An election may be near.

US crude hit final 88.80 target, AUDUSD stopped out, both EURUSD & 1 EURJPY in progress. Long cable & short EURJPY hit all targets. Long gold nearing 1600 target. Silver awaits. For direct access to these Premium Insights, click here: Non Subscribers can please click here:



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