Forex news for October 29, 2014:
- Federal Reserve ends QE3
- Fed: Underutilization of labor resources gradually diminishing
- Fed: Accommodative policy to be appropriate for ‘considerable time’ following end of QE
- Kocherlakota dissents in favor of more QE
- Full text of the FOMC statement
- RBNZ announce no change to cash rate – as expected
- RBNZ: Drops reference to further policy tightening
- RBNZ: Says level of NZD unjustified and unsustainable
- RBNZ: Expects further significant fall for New Zealand dollar
- Goldman Sachs (and others) react to the FOMC decision
- Bank of Canada Poloz: Monetary stimulus remains appropriate
- US DOE crude oil inventories 2061K vs 3130K expected
- Canadian RMPI Sept mm -1.8% vs -0.8% exp
- Barclays hit with massive lawsuit in bribery and lease payment suit
- Gold down $16 to $1211
- WTI crude up $0.62 to $82.04
- S&P 500 down 2.75 to 1982.30
- US 10-year yield up 2.5 bps to 2.32%
- US 2-year yield up 9 bps to 0.48%
- USD leads, NZD lags
Not 10 minutes before the FOMC a trade in my office was saying it was going to be a low-key decision. I warned him that you always have to prepare like it’s going to be a big one and that’s the way it went on Wednesday.
The market was looking for something more dovish than most economists and who can blame traders who have been rewarded time and time again for betting on a more QE and easy money. But the Fed killed QE3 and upgraded the assessment of the jobs market.
The dollar moves to the upside might have been exaggerated but I think lots of would-be dollar longs were simply waiting for the Fed to put on positions and would have been buying on almost any outcome.
The moves weren’t that fast and retail traders had time to get on board after the initial headlines but once the moves going going they really going moving. Within 10 minutes the dollar had gained around 90 pips right across the board.
USD/JPY jumped up to 108.90 from 108.05 and hardly retraced before finishing near the highs of the day. It was the same elsewhere as it was a one way move that didn’t give you a chance to buy if you were waiting for a retracement.
EUR/USD fell to 1.2660 on the first move from 1.2740. There was some selling in EUR/USD and GBP/USD ahead of the decision in a slightly suspicious move. The euro ends the day at the lows at 1.2630.
Cable is stubbornly holding 1.6000 but if 1.5995 breaks look for another wave of selling.
The antipodean currencies really took it on the chin with AUD/USD down to 0.8890 to 0.8780.
The kiwi took a second blow with the RBNZ decision and is down to 0.7775 from 0.7950 before the decision.
