Don't expect too much from Bernanke – warns MahiFX CEO
The markets are in a mindset that a third round of quantitative easing from the US Federal Reserve is inevitable following a recent string of weak US economic numbers and monetary easing by other central banks around the world, according to David Cooney, CEO of Christchurch-based currency platform provider MahiFX.
Commenting ahead of the US Federal Reserve Chairman Ben Bernanke's testimony to the US Senate to be delivered over Tuesday and Wednesday, he said that though QE3 from the Fed seems likely within months, the best markets can probably hope for is that Bernanke will hint at it, such as expressing concern over the weakening US economy and global economic uncertainty and that the Fed is carefully monitoring such developments.
“If Bernanke disappoints the markets, it is likely to see a sell-off in risk assets and could see GBP and EUR trade lower against the USD as investors flee to safe haven assets such as US Treasuries,” said Cooney. “Ironically, if the mood in the markets turns particularly negative with big sell-offs in equity markets for instance, it could actually pressure the Fed to bring forward QE3 to restore confidence. Bernanke will no doubt be mindful not to trigger such an outcome,”