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15 Jul 2013
Flash: USD expected to consolidate this week – BBH
FXstreet.com (New York) - The recent US dollar uptrend began in mid-June, encouraged by anticipation of Fed tapering and the resulting wider interest rate differentials, notes the BBH Currency Strategy Team.
Moreover, “comments by Federal Reserve Chairman Bernanke last week were interpreted by market participants as indicating that the reduction of asset purchases in the September/October period, which had solidified as the consensus view, was not a done deal – this sparked a sharp dollar sell-off.”
Looking ahead this week, Bernanke delivers the first leg of the Fed's semi-annual report to Congress Thursday July 18. According to the Team, “Given Bernanke's recent track record for injecting volatility into the foreign exchange market, we suspect that the dollar is likely to broadly consolidate as participants await clearer signals of the Fed's intent. The price action suggests that the short-term market positioning is not as extended now and this may mean it is less vulnerable to another Bernanke shock.”
Moreover, “comments by Federal Reserve Chairman Bernanke last week were interpreted by market participants as indicating that the reduction of asset purchases in the September/October period, which had solidified as the consensus view, was not a done deal – this sparked a sharp dollar sell-off.”
Looking ahead this week, Bernanke delivers the first leg of the Fed's semi-annual report to Congress Thursday July 18. According to the Team, “Given Bernanke's recent track record for injecting volatility into the foreign exchange market, we suspect that the dollar is likely to broadly consolidate as participants await clearer signals of the Fed's intent. The price action suggests that the short-term market positioning is not as extended now and this may mean it is less vulnerable to another Bernanke shock.”