Markets Brace Themselves For Bernanke

Markets Brace Themselves For Bernanke

By Andrew May (Sales Trader, CMC Markets New Zealand)

The Dow Jones notched another level higher into market stratosphere overnight touching the outer limits of 15,430 before retreating to close 15,387 after Fed officials calmed investors ahead of the highly anticipated FOMC testimony due tomorrow morning.

Indeed US markets seemed to have found 'dovish' remarks regarding an imminent exit strategy to its bond buying programme 'encouraging' to say the least.

In the midst of bullish market momentum and weaning US dollar strength the New Zealand dollar experienced an incredibly choppy night of trading as investors weighed up risk momentum. At one stage touching US 0.8210 before 'jitters' of a possible unwinding of the asset purchase scheme sent it tumbling US 1 cent to 0.8110. However, the NZDUSD subsequently pushed back higher after US Fed officials dented those expectations.

This just goes to show the fragility of market driven sentiment, care of the 'rumour mill'. Given the soft resource demand globally keeping the Kiwi firmly supported above 0.81c and US treasury yields under 2%, the stage is set tomorrow quite evenly. Direction will be provided care of an all-important Ben Bernanke check up under the bonnet of the US economy. I feel the Federal Reserve may think it too early to begin tapering its $85 billion a month programme just yet. After all there's not been sufficient evidence to indicate the economy can roll on all four wheels just yet. Therein lies the potential retest of a higher New Zealand dollar tomorrow morning.

ENDS

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