Ben Bernanke’s speech in Jackson Hole doesn’t provide any new policy guidelines. The QE or no QE question remains open with words such as “Negative Risks Of More Stimulus ‘Manageable”, but there certainly aren’t new hints like in 2010. “Grave concern about unemployment” also leaves the door open, but it doesn’t hint that Bernanke is walking through this door.
The dollar is stronger following the release of the statement, but without dramatic movements so far. The action is still going on. Update: the markets now turned around the the dollar is weaker. Live blog of his speech, market reaction and more.
13:58 GMT All times are GMT. EUR/USD is trading at 1.26, below highs.
13:58 The University of Michigan consumer sentiment was revised to 74.3 points from 73.6 beforehand.
14:00 Bernanke opted not to lay out any policy guidance – USD stronger according to Bloomberg.
14:01 Bernanke says labor market is Grave concern. Negative Risks Of More Stimulus ‘Manageable’.
14:02 EUR/USD falling below 1.2587 support. USD/JPY rises to 78.50.
14:03 EUR/USD now rebounds in choppy trading.
14:03 Bernanke doesn’t rule out further asset purchases.
14:08 EUR/USD falls deepening.
14:09 USD/CAD, which fell after strong Canadian GDP, is now rising towards resistance at 0.99.
14:10 Here is the part in the speech that can cheer up the QE3 camp: “At the same time, the costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.”
14:11 Here is the statement.
14:12 The Fed could act on a European disaster. Without that, further action doesn’t seem likely.
14:13 The Fed could extend the pledge for low rates in September. QE3 doesn’t seem that likely.
14:14 EUR/USD is now battling with the 1.2587 line.
14:15 The general notion is that Bernanke just repeated previous text.
14:17 Here is analysis from Matthew Lifson about Bernanke’s speech.
14:19 EUR/USD making a full turnaround and attacking resistance at 1.2624, so far without success.
14:22 Dollar fall continues with EUR/USD above 1.2624 and USD/JPY now falling to 78.20.
14:24 Not a lot of forward looking statements, but there is defense of past QE.
14:27 Adam Button notes two analyses: one saying QE3 is likely if the upcoming NFP isn’t outstanding. The other quotes the FT that finds a clue about extending the pledge, as aforementioned.
14:29 EUR/USD is now weakening back to the 1.2587 line. USD/JPY is at 78.34.
14:35 EUR/USD is stabilizing in the high range: 1.2587 to 1.2624.
14:38 Masa Serdarevic at Alphaville notes that the balance sheet of the Federal Reserve is actually shrinking.
14:42 At the moment, EUR/USD is almost unchanged since the speech began.
Background
Expectations towards this speech changed several times. At first, they were relatively low. Then, the dovish meeting minutes raised expectations with “many members” wanting to act “fairly soon”.
Afterwards, remarks about the minutes being “stale” and positive signs such as the strong retail sales number, housing figures and the good Non-Farm Payrolls are lowered expectations. Hours before the speech, the excitement rose once again.
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