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It was certainly a day of two halves: before and after Ben Bernanke’s speech. Regardless of your stance, whether dovish or hawkish, this speech was so broadly worded that it was open to interpretation from both sides. The initial reaction of the markets has seen equity indices creep higher, but with a suitably mild manner, implying that by this time tomorrow we could easily see a reversal.
In the speech there appeared to be some signs of back-tracking over the fact that the Federal Reserve’s target for unemployment was 6.5%. Certainly it felt like there was more of an open policy about the levels it would like to see. However, we did receive reassurance that the Fed would like the markets to have sufficient momentum before it would look to reduce the current $85 billion monthly quantitative easing policy.
So, on the back of the Fed’s comments, where exactly does this leave the European equity markets? The short answer is probably just as confused as they have ever been. The biggest problem with being open to the world’s media on such large fiscal policies is that it is essential to keep your cards close to your chest, while at the same time divulging enough information to maintain confidence. This is a particularly difficult skill, and one that the Fed is having trouble mastering.