The Bank of England Governor, quite early on in his tenure, was once likened (by a member of the UK parliament) to an “unreliable boyfriend” for giving mixed messages on the outlook for rates. But compared to Yellen, he’s looks like a bastion of trustworthiness. The Fed didn’t tighten rates last night and the accompanying news conference stuck a dovish tone, leading the dollar lower. Yellen highlighted the increased international uncertainty, together with the lower near-term inflation outlook and the tightening of financial conditions. The dollar index is around 0.60% lower on the Fed, with emerging market currencies also pushing ahead, although only tentatively so given the strength of recent gains. So, once again we’ve pushed the Fed into the tail end of the year. We started the year not expecting the Fed to hike at all in 2015 and there remains a decent chance that ends up being the case, but that carries on pattern of the past four years, of early year Fed hike expectations being disappointed.
On the majors, the Aussie has seen modest follow through during the Asia session, climbing towards the 0.7250 level, whilst the euro and Swiss franc have also performed well. USDJPY has once again pushed below the 120 level, currently pushing the lows seen early in the week at the 119.40 area. For today, there are no major data releases to distract from the Fed fallout. Given this is a Friday, it may be difficult to see risk assets follow through further from the trends seen this week.