At least one FOMC guessing game ended last night after the minutes revealed that tapering will end in October with a final $15 billion reduction in asset purchases, rather than leaving the last $5 billion until December. The usual caveat applies of course with the taper subject to economic conditions. With the way the US economy is shaping up though it’ll take some shock for the Fed to deviate from this course. Now we can focus on when the Fed is most likely to raise rates, but judging from the muted reaction of the dollar which has barely appreciated in the slightest, we are still a long way off from this. It reminds us that tapering is not tightening and the first rate hike when it comes is likely to be beyond H1 of 2015.
A big mover overnight has been the Aussie which has once again retreated from the mid 0.9400 area with AUDUSD falling to 0.9365 at the time of writing. The market was rather taken by surprise when unemployment increased to 6.0% and whilst such a piece of data isn’t welcome from the perspective of the wider economy, the central bank will like to see the Aussie softening.
Today’s major event will be the Bank of England interest rate decision although no fireworks are expected. Sterling has been softening a little this morning with GBPUSD retreating from overnight highs around 1.7165 to 1.7125 at the time of writing and on some technical indicators it remains over bought and now that the RSI is turning down it will be interesting to watch if a corresponding sell off in cable materialises.