11 Jul 2013
Flash: Was Bernanke’s message really dovish? – Deutsche Bank
FXstreet.com (New York) - In terms of the FOMC minutes, the verdict as initially thought of as being dovish judging by the market reaction, as the S&P500 rose to a session high of +0.35% shortly after its release, suggests Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank.
However, “probably driving that reaction was the line that many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases.” they add. Fed policymakers did not have the June employment data at the time of the meeting so it is possible that at least some of the FOMC members might be feeling more confident in the labor market outlook now than they were at the time of the meeting.
A few minutes later, equities ticked lower and the S&P500 ended unchanged on the day as markets began focusing on the more hawkish elements of the minutes. Probably one of the more hawkish lines in the minutes was the line that About half of participants indicated that it likely would be appropriate to end asset purchases late this year. “It would be fair to say that an end to purchases this year is an earlier time frame than virtually all expect. So something for everyone last night but it ended on a dovish note.”
However, “probably driving that reaction was the line that many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases.” they add. Fed policymakers did not have the June employment data at the time of the meeting so it is possible that at least some of the FOMC members might be feeling more confident in the labor market outlook now than they were at the time of the meeting.
A few minutes later, equities ticked lower and the S&P500 ended unchanged on the day as markets began focusing on the more hawkish elements of the minutes. Probably one of the more hawkish lines in the minutes was the line that About half of participants indicated that it likely would be appropriate to end asset purchases late this year. “It would be fair to say that an end to purchases this year is an earlier time frame than virtually all expect. So something for everyone last night but it ended on a dovish note.”