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Fed chairman Bernanke may effectively already be a lame duck as he is likely to step down in early 2014 and his dovish views appear to be increasingly isolated within the organisation. This could be a huge issue going forward.

Probably the most important debate on US monetary policy is whether there really is an aggregate demand shortfall, and as a result, a negative output gap. If the answer is yes, then the Fed should continue supporting the economy. If the answer is no, monetary policy should soon be tightened.

While the soft April employment numbers leave the door open for further monetary easing, the report isn’t bad enough to force the Fed to announce QE3 at the 19-20 June FOMC meeting.

Our latest take on Nordic and Global financial markets and economies.

Outlook for next week’s key figures and events in the US, the euro area, China, Japan, UK, Canada, Switzerland, Australia and New Zealand.

While QE3 is still expected to be announced in June, too little Fed tightening is priced in longer out.

At 2.2% US GDP growth was probably only slightly weaker than the Fed’s expectations for Q1. However, I believe the Fed’s growth forecast will be challenged more in Q2.

We see rates continuing lower in the coming months and the EUR/USD unchanged around the current levels.

Notable flight-to-safety demand has taken place today ahead of the Easter holidays. Even though the drivers are real, one should not over interpret the moves seen on thin markets ahead of a long weekend, with also tomorrow’s US employment report creating uncertainty.

Yesterday’s Fed minutes sent a signal that the central bank is not tilted towards more quantitative easing any more. Such a message opens more room for espcially longer US Treasury yields to rise from current levels.