Vague Janet breaks the CNH

The FX markets have again been dominated in Asia by the CNY and CNH, following the surprise CNY fix price that was set over 100 points higher than yesterday at 6.1490. This subsequently pushed the offshore CNH market above the physiological 6.20 level, which will be a concern to larger structured investors.

The main news, however, comes from the FOMC meeting last night that for me has a hawkish outcome but also a very confusing tone following Fed Chair Janet Yellen’s press conference. The Fed removed the 6.5% unemployment forward guidance threshold and tapered asset purchases by $10 billion to $55 billion per month as widely expected. The Fed replaced the unemployment guidance with the ‘dot plot’ theory, which suggested that rates will be at 1% by the end of 2015 from the previously predicted 0.75% at the December meeting. The media is full of criticism of the Fed this morning, and particularly of Janet Yellen, following her press conference on forward guidance where the aim is to clarify uncertainty. I’m going to give three statements here that certainly don’t support this.

1. ‘dots don’t matter that much’
2. On defining ‘considerable time’ as ‘around six months’ ‘but you know it depends’
3. Describing 25 basis points (as the guidance gave us) ‘only very limited’

As I’m feeling cynical, I note the Russian Central Bank published their FX reserve composition as of 30th June 2013:

US dollar 45.75%
Euro 41%
Aussie dollar 1%

Today’s data events come from the SNB this morning, with housing figures and the Philadelphia business survey from across the pond this afternoon.

EUR/USD

Supports 1.3810-1.3770-1.3705 | Resistance 1.3850-1.3900-1.3950

USD/JPY

Supports 102.15-101.75-101.20 | Resistance 102.50-102.85-103.80

GBP/USD

Supports 1.6540-1.6480-1.6440 | Resistance 1.6600-1.6650-1.6720