Flash: Thoughts on Tapering - OCBC Bank

FXstreet.com (Barcelona) - Emmanuel Ng of OCBC Bank notes that the dollar continued to consolidate against the majors on Tuesday and put in a mixed performance, strengthening against the GBP but ending a touch lower against the EUR.

He sees that the pound however was the mover of the day with the pair collapsing below 1.5200 and then 1.5150 on the back of softer than expected inflation figures. Meanwhile, comments from the Fed’s Bullard and Dudley comments were less hawkish than the commentary from his colleagues over the past week, tempering broad USD strength. Looking ahead, Ng notes that some mid-week volatility may be in store with the BOJ MPC (press conference to be scrutinized) and Bernanke’s testimony to Senate (1400 GMT) later today.

Regarding the latter, he writes, “Our base case remains for the Fed chairman to remain largely non-committal. Although this may see the dollar stall temporarily, it would unlikely completely diffuse market expectations of an eventual tapering of asset purchases.” In addition, he notes that FOMC minutes (1800 GMT) are also on tap today, potentially an added event risk for the dollar although he thinks the immediacy of Bernanke’s rhetoric may still dominate.