The notion of a September taper now seems to be taking a hit following both the Fed minutes and subsequent Bernanke speech, a notion that seemed to be where consensus was coalescing around. This leaves a late year (December for instance) taper still on the table, indeed the minutes noted that half of the meeting participants indicated that it would like be appropriate to end asset purchases this year (more aggressive than a gradual taper) while many supported asset purchases into 2014 (which may or may not imply a taper). We’ll note that the voting members of the Fed who are crucial for policy (such as Bernanke and Yellen) are certainly not going to be sharing the ’end asset purchases in 2013” opinion, which takes a bit of the sting out of that section of the minutes. While there was more of a mixed message, on balance a taper later this year at the earliest seems to be still well within region. The subsequent drop in the USD vs. the major currencies was notable, but nothing in comparison to what was to come.
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Scotiabank