Bernanke Sticks to Message, BoC Mentions China
Fed Chairman Bernanke's new message is being increasingly understood by the markets-- scaling down of asset purchases does not necessarily mean a tightening of policy as the Fed shall maintain policy accommodation. Today's testimony reiterated that as long as the economy maintains its current course, the path towards autumn tapering would eventually lead to the termination of purchases by next year. It does not matter whether this will actually happen. Instead, markets' positioning and interpretation plays the bigger role here...and so far, markets are unlikely to extend USD weakness beyond 5-7% in one week as long as the tapering is set to start this year. GBP outperforms across the board on an unexpected 9-0 MPC vote in favour of keeping QE at £375 bn, the first unanimously hawkish vote since October. Better than expected UK jobs figures also helped. GBPUSD Premium longs hit their final target.
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