- Bernanke blazes no new monetary trails in his Jackson Hole speech; markets breath a sign of relief.
- Fed stands ready to easy further but only if economy slows significantly; Bernanke, Fed staff less fearful on growth than Wall St.
- US GDP revised down to 1.6% in Q2; smaller downward revision than expected.
- Reuters, Nikkei add to expectations that BOJ will loosen policy early next week
- ECB’s Weber: Upbeat on European growth; reaching self-sustaining recovery– CNBC
- S&P 500 rises 1.7% after bouncing from 1040 support
- US 10-yr note yield rises 16 bp in yield to 2.64%
Loads of volatility intraday as the market tried to get its head around Bernanke’s message as well as deal with sizable flows, some for month-end in thin Friday summer markets.
The market initially treated the Bernanke comments as a catalyst to reduce risk. They sold stocks, commodities (and commodity currencies) and EUR/JPY. Then just as quickly, the risk switch was flipped back on all those trend reversed and asset markets recovered a significant portion of their losses on the week.
EUR/USD fell to 1.2678 shortly after the speech only to recover to 1.2780 little more than an hour later. Stops above the 1.2760 level were triggered on the rally.
USD/JPY jumped to 85.46 after breaking through downtrend resistance at 85.37 on an intraday basis. Heavy exporter sales are seen up to the 85.50 level but another round of stops is seen just above that level.
AUD/USD was in demand by hedge funds early in the day and again at the 15:00 GMT fixing where is soared from 0.8925 to 0.8985. We end the day essentially on session highs around 0.8985.
USD/CAD was quite choppy, spiking to 1.0648 after Bernanke spoke before reversing to end the week near its lows, around 1.0520
Monday will see very thin markets with London closed for a bank holiday.
Have a great weekend all!