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Currency Analyst since 2010

FOMC meeting: more expectations

Analysts at Nomura believe that the Fed will taper bond purchases as there’s the danger of bubbles that could threaten the financial stability of the US, but the tapering will be gentle to avoid a major shock to the real economy.

JP Morgan underlines that Bernanke should explain how tapering differs from tightening (and even pausing, which comes between those two phases). According to the bank, higher-yielding and commodity currencies may rally into the event and just after as the markets may have misread the Fed’s intentions about the timing of tapering.

“If Bernanke does not signal tapering, we would expect to see higher stock and bond prices before the end of the week and stronger USD,” says BNY Mellon, adding that the Fed would instead keep its options open through the summer. Mizuho adds that “the FOMC outcome is likely closer to a continuation of easing than to an exit. If so, expected gains in stocks will likely weaken the yen against the dollar.”

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