18 Sep 2013
Technical milestones all over, USD selling on dips a 'value trade'
FXstreet.com (Barcelona) - Bernanke kept his legacy as one of the most dovish central bankers in history intact, after deciding a No taper' move in today's monetary policy decision, noting 'it needs more evidence' that economic growth in the U.S. is sustainable. Market had been pricing tapering in the tune of $5 to $10 billion dollars.
"The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market," said the Fed in its FOMC statement.
Key breakouts all over the place
Markets went completely nuts, with all things USD falling off a cliff, leading to certain asset classes to reach technical milestone. The AUD/USD hit the all important 38% fib retac, the USD/CHF broke a multi-month range after reported stops sub 0.92 were tripped, the EUR/USD rose to the 1.35 round number, GBP/USD conquered the 1.60 and beyond, metals had one of the most impressive bull runs YTD, the Dow and S&P 500 surged to new all-time highs, bond interest rates collapsed...
Why Oct will not be ideal to start tapering
Yesterday, in a FOMC preview article, the FXstreet.com Asian Team covered the reasons why economists thought it was safe to assume some form of light taper was a done deal today, citing Credit Suisse chief economist Neal Soss.
While getting it wrong, the argument as to why October is as bad a month to start taper as any, remains.
According to Soss: "October is likely to be right in the middle of the debt ceiling fight", also adding that "President Obama may announce a nominee for Bernanke’s successor in mid-to-late October; this would not be an ideal moment for the central bank to experiment with a potentially disruptive operational change."
What this translates into? It means that the market expectations for taper have now been pushed quite a bit further down the road, to either Dec or early 2014, since there is no FOMC meeting in November. What are the implications for? If the assumption is correct, it seems plausible to think that financial markets still have some fresh legs up to develop against USD.
"The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market," said the Fed in its FOMC statement.
Key breakouts all over the place
Markets went completely nuts, with all things USD falling off a cliff, leading to certain asset classes to reach technical milestone. The AUD/USD hit the all important 38% fib retac, the USD/CHF broke a multi-month range after reported stops sub 0.92 were tripped, the EUR/USD rose to the 1.35 round number, GBP/USD conquered the 1.60 and beyond, metals had one of the most impressive bull runs YTD, the Dow and S&P 500 surged to new all-time highs, bond interest rates collapsed...
Why Oct will not be ideal to start tapering
Yesterday, in a FOMC preview article, the FXstreet.com Asian Team covered the reasons why economists thought it was safe to assume some form of light taper was a done deal today, citing Credit Suisse chief economist Neal Soss.
While getting it wrong, the argument as to why October is as bad a month to start taper as any, remains.
According to Soss: "October is likely to be right in the middle of the debt ceiling fight", also adding that "President Obama may announce a nominee for Bernanke’s successor in mid-to-late October; this would not be an ideal moment for the central bank to experiment with a potentially disruptive operational change."
What this translates into? It means that the market expectations for taper have now been pushed quite a bit further down the road, to either Dec or early 2014, since there is no FOMC meeting in November. What are the implications for? If the assumption is correct, it seems plausible to think that financial markets still have some fresh legs up to develop against USD.