Has Bernanke Mastered the Markets?

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Due to testify on the Semiannual Monetary Policy Report before the Senate Banking Committee today, the Federal Reserve Chairman will have the attention of the world financial markets.

Federal Reserve Chairman Ben Bernanke told the House of Financial Services Committee yesterday that he thinks “markets are beginning to understand our message”.

It’s no surprise that markets have been volatile since late May when the term “Tapering” dominated media outlets.

Though tapering is on the way (slowing down of Fed stimulus efforts), Bernanke clearly stated that short-term interest rates will stay near zero “for the foreseeable future.”

Currently the Fed is spending $85 Billion/ month in their stimulus measures.

Has Bernanke Mastered the Markets? Where are the Market Reactions?

Some analysts are saying that Bernanke may have mastered the art of communicating a message that isn’t too hawkish or dovish. After yesterday’s speech, with little volatility following, some have come to that conclusion. The problem with the conclusion is that it’s based on very little data. Hawkish, dovish, bearish, bullish, it all comes down to market maker’s and trader’s perception of the market. If one guy can master that, I’m impressed.

In today’s testimony, Bernanke will likely confirm what he has already said. Tapering could come later this year and QE3 will continue until there’s “substantial improvement” in the economy.

In the Forex Market today the U.S. Dollar is showing some strength preceding Bernanke’s speech. Today’s good-news unemployment report may be contributing to that minute volatility.

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