Don't Write Off The USD Just Yet - Commerzbank
This week's statements from Fed members who want to reduce bond purchases as early as September, change little about the recent USD weakness, notes Commerzbank.
A very clear example on that, according too CB, applies for the recent statement by Fed Charles Evans from Chicago, which referred to the positive developments on the labor market and had considered tapering as early as September to be possible.
"What is almost more important is that so far Evans was not a member of the hawks’ camp, but had been a decisive supporter of expansionary Fed policy. It was not enough to get the FX market to move though," CB adds.
That is likely to be due to the fact that many market participants are no longer willing to rely on speculation regarding imminent tapering, CB argues.
"The market wants to see deeds now and above all it is missing clearer information from Fed President Ben Bernanke. So far the latter has been relatively evasive knowing full well that his comments are more important for the market than those of his colleagues. Should he follow his colleague’s comments soon, sentiment on the market is likely to turn very quickly," CB clarifies,
"We therefore advise against writing off USD too quickly," CB advises.