The end of the taper era

The dollar is bid across the board in the FX space following the FOMC meeting. The Federal Reserve confirmed an end to QE3, after nearly half a century of pumping money into the US economy. With recent global concerns with regards to growth and the threat of disinflation, the market was looking for more of a dovish tilt in the statement. The ‘considerable time’ language, with regards to rates staying low, remained but there was no mention of the strong dollar, global growth concerns =or market volatility. The positive takes from the statement were that the Committee now sees the labour market underutilisation as ‘gradually diminishing’ versus the previous wording of ‘significant’. The assessment of the labour market was described as ‘solid’, with no mention of the poor consumer consumption data in the form of disappointing September retail sales data.

The RBNZ left rates unchanged overnight at 3.5% as the statement was deemed initially bearish; the forward guidance having dropped the reference to a further tightening of policy. They continued to stress that the NZD remains unjustifiably high and unsustainable as they continue to suspect significant falls in the currency.

The data from Europe has been mixed this morning. German unemployment surprised to the upside, although this has been overshadowed by weak inflation readings from both Germany and Spain. EU confidence data is released this morning ahead of US GDP, with the Fed Chair Janet Yellen to speak in Washington this afternoon.

EUR/USD

Supports  1.2550-1.2501-1.2460  | Resistance 1.2625-1.2670-1.2720

USD/JPY

Supports 108.75-108.60-108.45  | Resistance 109.35-109.50-110.10

GBP/USD

Supports 1.5940-1.5875-1.5855  | Resistance 1.6025-1.6065-1.6125