Bernanke Out of Bullets, But Market Clings to Hope (For

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In an official testament in front of the Joint Economic Committee, the Chairman of the Federal Reserve says that monetary policy not a panacea for the problems currently faced by the U.S. economy.

The markets, which extremely choppy and volatile, can find hope in the declaration that the Fed is “prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability”. The dollar is weaker. But this is by no means a hint for QE3. As this sentence finishes, Bernanke actually admits that bullets are running out.

The  last paragraph shows that Bernanke is out of bullets and also points the finger to the government in the strongest way,

Ben Bernanke uses the word “fiscal” 11 times in his official testimony.

Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy. Fostering healthy growth and job creation is a shared responsibility of all economic policymakers, in close cooperation with the private sector. Fiscal policy is of critical importance, as I have noted today, but a wide range of other policies–pertaining to labor markets, housing, trade, taxation, and regulation, for example–also have important roles to play.

For anybody still expecting QE3, Bernanke’s words offer no hope.

The dollar is currently losing ground against all currencies apart from the yen. This is “risk appetite” trading, exactly as it was seen yesterday after the positive ISM Manufacturing PMI.

Did that hold? No. There are heavy doubts that this risk rally will hold as well. Either the heavy USD/CHF selling reported here will fade, or either the markets will fully digest Bernanke’s statement.

Further reading:  Euro Cannot Find Bottom

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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