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EU bank rescue template stops short of Cyprus model

| | Forex News
Jamie Coleman

Hits shareholders and junior bondholders before taxpayers foot part of the bill.

Details from the FT:

This updated EU rule book is based on the experience in Spain – where junior bondholders were hit and EU restructuring plans were agreed before the disbursement of bailout funds – and the Netherlands, which hit subordinated creditors in the nationalisation of SNS Real.

However, it stops short of the Cyprus bank restructuring, which imposed losses on senior bondholders and uninsured depositors. The EU is presently negotiating a directive that could bail-in senior bank creditors but these rules are unlikely to be enforced systematically before 2018.

Lots of wiggle room on taper for Bernanke

| | Central Bank
Jamie Coleman

Personally, I’d be shocked if the Fed began to taper bond purchases before the fourth quarter of this year, but Bernanke did keave the door open to acting in the next few meeting, with some caveats. The economic data will have had to have improved and the FOMC must be confident that the improvement is sustainable. That last clause on sustainability gives them plenty of time to wait and see…

The minutes of the last FOMC meeting won’t nearly as exciting as usual given that Bernanke has stolen the spotlight.

Bernanke: Fed inflation record as good as any major central bank

| | Central Bank
Jamie Coleman
  • Employers are reluctant to look at workers who have been unemployed for a long time
  • Low rates are adding to employment and wealth
  • Fed has greatly increased monitoring of financial stability; looking for signs of frothiness or bubbles
  • Fed not monetizing government debt. To so so would be to finance permanently; QE is temporary
  • Fed agrees with G7 statement that monetary policy should be focused on domestic ends, not focused on currency rates
  • Japanese monetary policy appears to be working, impacting financial markets and real economy

USD/JPY making fresh highs as Bernanke addresses “tapering”

| | USD/JPY
Jamie Coleman

He didn’t rule it out and said it would be discussed in the next few meetings. A complete turnabout from his prepared remarks, which were very dovish.

103.50 barriers are coming into play. Highs so far: 103.45.

USD/CHF is soaring as well, shooting through 0.9800, to 0.9803.

Bernanke continues to caution Congress on overdoing fiscal restraint.

If anything, Bernanke says inflation is a bit too low.

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