After Janet Yellen’s dovish comments the prior week, Bernanke’s comments were taken as being pro tapering in the next few months. This is hardly fresh news. This see-sawing of expectations on tapering seem set to continue in coming weeks and into the Dec FOMC meeting.
Last week, Janet Yellen continues her dovish stance. She believes that accommodative policy remains necessary as the unemployment rate is still too high and at the inflation rate is too low. Any tapering would be conditional on more evidence of a sustained improvement in the labour market and the broader economy. These comments saw a turnaround in the markets after Friday night's Non farm Payrolls movements.
The Fed remain dovish and seem to be a little more focussed on low inflation, the Eurozone has very weak inflation and soft growth so bonds have found a good bid. Have AUS bonds built a base again?
Payrolls tend to dip into the middle of the year and then accelerate into Q1 the following year. If we follow the pattern of the previous 3 years then expect even stronger payrolls in coming months.
After a decent two week rally in our market, the rejection of 2.50% in US bonds, better local data and a 3c fall in the AUD have caused our market to reject the resistance levels this week. This suggests a short term top is in place.