USD: important Wednesday
Market players have recently started speculating that the Fed may start tapering its bond buying program. Yet, US consumer prices fell 0.4% in April and lower inflation might make the Fed keep QE well in place.
Watch Bernanke’s testimony to Congress and the FOMC minutes on Wednesday. So far the Fed’s Chairman has given no indication of wanting to reduce QE program any time soon.
Barclays Capital: Bernanke might “reiterate the Fed’s commitment to an accommodative policy stance, while sticking to the latest policy statement in terms of cost and benefit of further QE, and say that it is prepared to increase or decrease the size of purchases as the economy evolves.”
Citi: “We doubt that Bernanke would signal a significant change in outlook ahead of the June 19 FOMC. In this regard, if the Chairman highlights the still very stable inflation expectations gauges and hence downplays the importance of recent data, this could support USD.”