alchemist | 
07 1st, 2011| 
The USD traded higher against nearly other currencies except the CHF. After the FOMC rate announcement and Bernanke’s press conference, It seemed that the traders are confident about USD. But for stock market, equity traders did not welcome Bernanke’s comments and also the stocks gave up all its gains and traded lower in the course of Bernanke’s speech and soon after the US market closed. Why this occurred was because that Bernanke’s speech was not particularly shocking. Bernanke divulged Fed’s plan in April, when the purchasing of assets are completed but through the FOMC, he did not say anything that provides investors some greater insights of what the Fed will do subsequent. In fact, Fed really does not have any clue on what to perform next, which can be the important takeaway for this month’s Bernanke’s speech. Bernanke admitted that Fed did not know why the slower growth persisted, that is a really honest admission for Fed. However, this really is really disappointing for investors as Bernanke is saying that Fed does not have any notion how the economic climate will move forward. Depending on the thriftiness from the shoppers, the high unemployment numbers and also the possible effect of Greece government defaulting their debts, nobody can blame the Fed for not figuring out where the economic system is heading to, even if other critics or financial analyst would argue that it is Fed’s job to know as this concerns the long term of where the economic climate really should be heading and what methods they really should take. Also, if Fed isn’t certain about their very own economic climate, how can they anticipate investors to believe that there will likely be recovery inside the economic system for your next few months? The only point that may be certain is that Fed won’t be rising the interest rates anytime soon and will probably be placing their reinvestment strategy on hold until the nonfarm payroll numbers and retail sales numbers are great. Offered the present scenario in the US economic system, the enhance in interest rates may possibly require a minimum of six to seven far more meetings depending on the present trend of US economic climate development, in spite of Bernanke talked about that the extended period indicates two to three more meetings.
Bernanke: No adjust of game program
As of now, Fed’s game plan, which was outlined in April 2011, did not change. Fed’s asset purchase plan will be completed by end June 2011 and if the Fed deem fit, Fed will reinvest the payments from maturing securities. To summarise, there is a lot for Fed to become worried about, as a result, no point rushing towards the exit. It is going to take some years for US to reach complete employment, which implies that Fed may be relax on their monetary policies so long as it is needed. In fact, Bernanke is keeping the door wide open by saying that if needed, Fed can inject a lot more stimulus. If due to the default of Greek which will affect the markets, causing asset costs to drop drastically around the planet, Bernanke could seriously consider to inject a lot more stimulus. Even so, for the time being, QE3 is highly risky for USD.
Bernanke: To carry on viewing US financial reports
As such, it’s going to be of paramount value to carry on watching the incoming US financial reports because the answer will probably be within the information. If the numbers continued to become reduced, Fed?fs reinvestment program will be continuing. But if data exhibits improvement, Bernanke may possibly contemplate additional methods to get rid of emergency stimulus, that will include a rate hike.
