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Posted December 19th, 2013 by Charles Purdy

US starts to taper as US economy strengthens

The US dollar started yesterday with mixed fortunes, falling first against sterling and the euro, but making gains for the first time in four days against the Japanese yen in anticipation of the central bank decision in the evening. The Federal Reserve voted in favour of tapering its quantitative program by $10 billion a month ($5bn reduction in treasury purchases and $5b in mortgage bonds) starting from January. The central bank stated that the decision to taper was largely due to the improved outlook for the labour market, noting  that the unemployment rate will fall faster than previously thought whilst also raising its GDP growth forecasts. Despite this – the comments made from the outgoing Chairman Ben Bernanke were very accommodative, suggesting interest rates will not be hiked until “well past the time that the unemployment rate declines below 6.5%” and especially if inflation remains low. He also made clear that tapering the quantitative easing program shouldn’t be deemed as tightening monetary policy and the continued tapering would be depending on more encouraging data coming from the US. Furthermore, a $10 billion reduction a month is but a drop in the ocean when you consider that the Federal Reserve’s quantitative easing program has put over a $1 trillion dollars of debt onto its balance sheet to date. Data released yesterday played second fiddle to the central bank announcement with the building permits figure coming out as expected. Today there are a number of data releases due to follow on from last night’s decision. Firstly, we will hear the ever important unemployment claims data, while later on we have both the existing home sales data and the Manufacturing Index from the Philadelphia Fed, although further reactions and fallout from the tapering decisions and forward guidance will have a much greater bearing on the US dollar. Get in touch with your trader now for the latest US dollar rates.

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Posted December 18th, 2013 by Charles Purdy

Will they, won’t they taper – a big day for the US dollar

The US dollar enjoyed another positive day yesterday, as speculation continued to mount ahead of tonight’s monetary policy decision. The US currency rose for a fifth day in a row against sterling to hit six week highs, whilst also reaching a near five year high against the Japanese yen. Recent good data from the US has increased speculation the Federal Reserve’s quantitative easing program could be reduced at this evenings meeting, and as such helped see some strength return to the dollar. However, this is by no means a forgone conclusion and only around a 1/3rd of economists surveyed yesterday felt the central bank would taper at this evenings meeting and even then, the opinions vary as to how much they believe the Federal Reverse will reduce its bond purchase by.

Posted December 17th, 2013 by Charles Purdy

US dollar awaits tomorrows Federal Reserve announcement tomorrow

The US dollar had a disappointing start to the week, as investors faced some uncertainty over the advent of the tapering of the Federal Reserve’s quantitative easing program. A few smaller economic indicators came in ahead of expectations which helped raise expectations that we could see the central bank taper at Wednesday meeting hopes for the US, but many investors feel that even if the Federal Reserve does decide to taper, interest rates will be kept at record lows for the whole of 2014. The impact of any reduction was also in question, with some thinking the impact may be minimal or already priced in.

Posted December 16th, 2013 by Charles Purdy

Will they, won’t they taper – we find out on Wednesday

The US dollar made further positive movements to end the week, with speculation mounting that the Federal Reserve could taper its quantitative easing program at this week’s meeting. The “will they, won’t they” rhetoric surrounding the potential taper is by far the most important event of the week and it has the potential to cause a significant impact on the whole global foreign exchange market. Before this, there are a number of stocking fillers to wet peoples appetite, with multiple releases on Monday including the Empire State Manufacturing Index and the flash manufacturing PMI amongst others. Tuesday’s main release will be the core inflation Consumer Price Index with more inflation data and current account figures to support this.

Posted December 13th, 2013 by Charles Purdy

Events increase likelihood of Pre-Christmas “taper”

US dollar markets this week centred once again around increased speculation as to when we could see the Federal Reserve taper its quantitative easing program. The US dollar struggled at the start this week with little data to support the previous week’s gains, starting off with the first drop in five days against sterling. Positive negotiations over next year’s budget that would reduce the severity of automatic spending cuts gave investors hope that the tapering could be seen this side of Christmas. Yesterday, sentiment increased that we could see the central bank taper at next week’s monetary policy meeting thanks to retail sales figures beating expectations helping the US dollar to rally, despite the unemployment claims failing to meet market estimates.

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