Falling jobless claims figures in the UK & US are rendering claims by the BoE and Fed on rising yields to be pointless. Efforts from Carney and Bernanke to talk down yields are increasingly futile as jobless claims hit 6-year lows and 3-year lows in the US and the UK.
At the end of day, Carney's forward guidance message is not so different from Bernanke's:
i) Rates will not be raised before 2 year's time;
ii) Bernanke refereed to 6.5% unemployment and Carney referred to 7.0% unemployment as thresholds;
iii) Both used 0.5% as the maximum excess over 2% inflation.
These dates are so far off the horizon, that they reduce the relevance of longer-term yields and shift volatility towards the shorter-end of the curve. Currency traders eyeing yield differentials are increasingly focusing on 2-year yields in the UK and the US as the central banks of both nations perfect the art of forward guidance. And with the UK/US 2-yr yield spread in positive territory (2-yr yields in UK above US), GBPUSD shall remain supported above 1.5350s.
GBPUSD faces further upside near 1.5680-1.5700, while maintaining support above 1.5300. GBP support will also emerge from the Fed's insistence on maintaining policy accommodation due to the risk of averting disinflation.
Thus, even a decision to taper purchases in September may end up being USD neutral if the tapering is deemed to be more modest than expected ie $5 bn instead of the average $10bn.
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As gold regains $2000/oz for the third time over the past three years, it's important to distinguish the fundamental and intermarket dynamics for each of these three occasions ($2000/oz) before assessing the road ahead. There are endless combinations of metrics to be used in comparing August 2020, March 2022 and today. I will use the DXY, gold/silver ratio, Fed Funds rate and the Fed's Balance Sheet.