The Federal Reserve has ended its third round of quantitative easing, opening the door for future rate hikes despite dovish expectations boosting the US dollar and surprising the foreign exchange market.
The US Federal Reserve's Open Market Committee (FOMC) has just concluded its latest monetary policy meeting and the result is the widely expected end of the Fed's bond buying program also dubbed "tapering". The quantitative easing (QE) effort by the U.S. central bank, targeted at keeping long-term interest rates closer to zero.
However, this decision has been widely expected by the markets and the key aspect of the Fed's decision today has been the release of the monetary policy statement which is supposed to shed light on how the FOMC thinks about the future timing of rate hikes.
While there hasn't been any indication about the Fed actually resorting to rate hikes any time soon, the bond markets and the US dollar have interpreted the statement as very hawkish.
The US dollar rose across the board, trading about 0.8% higher against the Euro (1.2645) and the British pound (1.6015), 0.7% higher against the Japanese yen (108.76) with the biggest loser being the New Zealand dollar (0.7839) falling about one percent as of writing.
There have been two sentences in the FOMC's statement which caught the attention of traders. The members of the committee stressed on the labor market recovery saying, "A range of labor market indicators suggests that underutilization of labor resources is gradually diminishing."
On inflation we are reading, "Although inflation in the near term will likely be held down by lower energy prices and other factors, the Committee judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year."
"Diminishing" Is Key!
The "diminishing" slack in the labor market and likelihood of low inflation continuing was all the US dollar bulls needed to hear. According to the Fed, risks to the opposite side of its dual mandate have been in concert with the labor market recovering faster than expected and inflation likely to rise higher than present levels.
There is no telling what Mr. Market thinks about that for now. We have repeatedly seen foreign Exchange traders overreact to small clues dropped by central bankers, however it appears as if at present, the US dollar's strength has a bit more room to stay as gold lost 1.5% of its value in today's trading so far to trade at $1210.80 as of writing.
Challenges remain going forward however - as the Fed roughly maintains the size of its balance sheet, (which is only partially true, since the central bank will still be reinvesting its proceeds into government bonds) the pressure on asset prices could lead the US central bank to reconsider its intentions to raise interest rates and the US dollar course would reverse.
According to the market for short-term interest rates there is a likelihood of a rate hike by the Fed in September 2015, however we have been here before - only to get another round of QE a couple of months later.
Goldman Sachs announced that it is increasing its short positions in fed-funds futures and the market seems to be playing the same tune this historical evening, when the Federal Reserve announced the end of predetermined bond buying for the third time. How long will it last this time around?
The US Federal Reserve's Open Market Committee (FOMC) has just concluded its latest monetary policy meeting and the result is the widely expected end of the Fed's bond buying program also dubbed "tapering". The quantitative easing (QE) effort by the U.S. central bank, targeted at keeping long-term interest rates closer to zero.
However, this decision has been widely expected by the markets and the key aspect of the Fed's decision today has been the release of the monetary policy statement which is supposed to shed light on how the FOMC thinks about the future timing of rate hikes.
While there hasn't been any indication about the Fed actually resorting to rate hikes any time soon, the bond markets and the US dollar have interpreted the statement as very hawkish.
The US dollar rose across the board, trading about 0.8% higher against the Euro (1.2645) and the British pound (1.6015), 0.7% higher against the Japanese yen (108.76) with the biggest loser being the New Zealand dollar (0.7839) falling about one percent as of writing.
There have been two sentences in the FOMC's statement which caught the attention of traders. The members of the committee stressed on the labor market recovery saying, "A range of labor market indicators suggests that underutilization of labor resources is gradually diminishing."
On inflation we are reading, "Although inflation in the near term will likely be held down by lower energy prices and other factors, the Committee judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year."
"Diminishing" Is Key!
The "diminishing" slack in the labor market and likelihood of low inflation continuing was all the US dollar bulls needed to hear. According to the Fed, risks to the opposite side of its dual mandate have been in concert with the labor market recovering faster than expected and inflation likely to rise higher than present levels.
There is no telling what Mr. Market thinks about that for now. We have repeatedly seen foreign Exchange traders overreact to small clues dropped by central bankers, however it appears as if at present, the US dollar's strength has a bit more room to stay as gold lost 1.5% of its value in today's trading so far to trade at $1210.80 as of writing.
Challenges remain going forward however - as the Fed roughly maintains the size of its balance sheet, (which is only partially true, since the central bank will still be reinvesting its proceeds into government bonds) the pressure on asset prices could lead the US central bank to reconsider its intentions to raise interest rates and the US dollar course would reverse.
According to the market for short-term interest rates there is a likelihood of a rate hike by the Fed in September 2015, however we have been here before - only to get another round of QE a couple of months later.
Goldman Sachs announced that it is increasing its short positions in fed-funds futures and the market seems to be playing the same tune this historical evening, when the Federal Reserve announced the end of predetermined bond buying for the third time. How long will it last this time around?
FM's Editor-in-Chief Yam Yehoshua on how the newsroom evaluates stories.
FM's Editor-in-Chief Yam Yehoshua on how the newsroom evaluates stories.
FM's Editor-in-Chief Yam Yehoshua on how the newsroom evaluates stories.
FM's Editor-in-Chief Yam Yehoshua on how the newsroom evaluates stories.
Matthew Smith, Group CEO at EC Markets, speaking at FMLS:24
Matthew Smith, Group CEO at EC Markets, speaking at FMLS:24
Matthew Smith, Group CEO at EC Markets, speaking at FMLS:24
Matthew Smith, Group CEO at EC Markets, speaking at FMLS:24
Finance Magnates Annual Awards 2024 | FM Awards 2024 Highlights
Finance Magnates Annual Awards 2024 | FM Awards 2024 Highlights
🎥Catch the best moments from the Finance Magnates Annual Awards Gala Dinner!
An evening where top names in finance came together to celebrate achievements, enjoy live music, and connect over a memorable dinner. Watch the highlights and feel the energy of our first gala in Cyprus!
Congratulations to all the winners for their dedication to excellence and leadership in the financial industry, including XM, Trading PRO, FP Markets, Deriv, FxPro, LATAM, Headway, ATFX, FBS, AMEGA, EC Markets, Axi
For more information about the 1st Finance Magnates Annual Awards, visit https://bit.ly/3Zb7wNz
#FinanceMagnatesGala #IndustryExcellence #GalaHighlights #FinanceMagnatesAnnualAwards #FinanceMagnatesAwards #CelebratingSuccess #FinanceCommunity
🎥Catch the best moments from the Finance Magnates Annual Awards Gala Dinner!
An evening where top names in finance came together to celebrate achievements, enjoy live music, and connect over a memorable dinner. Watch the highlights and feel the energy of our first gala in Cyprus!
Congratulations to all the winners for their dedication to excellence and leadership in the financial industry, including XM, Trading PRO, FP Markets, Deriv, FxPro, LATAM, Headway, ATFX, FBS, AMEGA, EC Markets, Axi
For more information about the 1st Finance Magnates Annual Awards, visit https://bit.ly/3Zb7wNz
#FinanceMagnatesGala #IndustryExcellence #GalaHighlights #FinanceMagnatesAnnualAwards #FinanceMagnatesAwards #CelebratingSuccess #FinanceCommunity
FMLS:24 | Shaping the Next Era of Financial Evolution
FMLS:24 | Shaping the Next Era of Financial Evolution
Welcome to FMLS:24 – the premier event where influential brands and leaders in trading, payments, fintech, and digital assets come together!
Join over 2,500 industry professionals, engage with 150+ expert speakers, and discover endless opportunities with 70+ top exhibitors. FMLS:24 is where senior executives and decision-makers gather to close deals, forge new partnerships, and strengthen connections with long-term clients.
Whether you’re in finance, technology, or payments, this summit is your gateway to future growth, meaningful collaborations, and industry-leading insights.
👉 Don't miss out – secure your ticket now at https://events.financemagnates.com/ZQEYy0?utm_source=youtube&utm_campaign=fmls24-awareness&utm_medium=video&RefId=MLS%3A24+Video+Promo
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Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Welcome to FMLS:24 – the premier event where influential brands and leaders in trading, payments, fintech, and digital assets come together!
Join over 2,500 industry professionals, engage with 150+ expert speakers, and discover endless opportunities with 70+ top exhibitors. FMLS:24 is where senior executives and decision-makers gather to close deals, forge new partnerships, and strengthen connections with long-term clients.
Whether you’re in finance, technology, or payments, this summit is your gateway to future growth, meaningful collaborations, and industry-leading insights.
👉 Don't miss out – secure your ticket now at https://events.financemagnates.com/ZQEYy0?utm_source=youtube&utm_campaign=fmls24-awareness&utm_medium=video&RefId=MLS%3A24+Video+Promo
#fmls #fmls24 #fmevents #financemagnates #forex #payments #crypto #events #london #fintech #ai #generativeai #technology #onlinetrading #forex #investing #investors #tech
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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