As September’s FOMC minutes are released today it is worth considering how rates expectations have evolved since June. Three critical policy days alonehave accounted for 20-25% of the variation in 1-year forward rates since June:
1. Bernanke discusses tapering at the June FOMC press conference
2. Summers withdrawals from consideration of Fed chairmanship
3. Tapering is delayed in the September FOMC statement
Bernanke’s June press conference was seen to outline a potential roadmap for tapering and resulted in bear steepening while September’s FOMC statement delayed tapering and caught the market off guard with a sharp bull flattening.Both events resulted in sharp dollar moves (up and down, respectively).
Read the full report: FX Daily
Deutsche Bank