Ben Bernanke surprised the markets by not tapering last week and remaining non committal about future course of actions. Fed members want to wait and watch for more signs of economic recovery.While the Fed returned to its dovish stance, it will be interesting to observe how its counterparts in ECB and BOE are going to position themselves.
ECB's Forward guidance has felt to impressed the markets.With the excess liquidity coming down and hovering around the crucial level of 200 Billion euros, euro not far from ECB's discomfort label of 1.36, a LTRO looks almost a done deal.what would be more interesting to observe is that will ECB strengthen its forward guidance by adding a key economic statistics such as GDP threshold or Unemployment rates ?In my opinion there's still months before ECB actually do so but its definitely not off the cards.
BOE's Carney will similarly be having a tough time with pound above 1.6 threatens to derail the slow pace of recovery.Carney's open ended forward guidance has similarly failed to impress the markets with Short Sterling Futures contracts preponing the Interest rate hikes since his arrival.
With yellen likely to take the command from bernanke, there's interesting time ahead for financial markets.