"While the Fed has given few clues, the faith and hope remains that Bernanke may deliver a hint next week; that the Fed may deliver QE3 on August 1; and if all else fails, Jackson Hole will bring enough of the world’s believers together to will QE3 to happen" comments the bank.
But the bank's concern is that central banks are falling behind the curve: "China is slowing more rapidly, the ECB is holding back waiting for the ESM to be formalised and QE3, if/ when it comes, may follow the laws of diminishing returns. We see emerging signs of a more potent slowdown in global data late May/ early June and that raises our level of concern. We remain ﬂat for another week, patiently waiting for our levels."
At Westpac, they are keen to sell into this current market optimism in risk currencies like the Aussie or Kiwi, but are wary that markets may remain bid into Bernanke next week. Nevertheless, they give their take: "USD uptrend remains in good shape while the case for AUD above 1.0250/1.03 is wearing thin; while NZD above 0.80 looks like a fair neutral territory. USD/Asia outlook, BoK decision will re-focus the market attention on the growth slowdown taking place."