FOMC October Statement – Reaction

No new development from the latest FOMC decision. Other than reaffirming markets about Fed’s commitment to stabilize market and improve employment figures, traders did not gain any new knowledge of Fed’s planned action should this round of “QE Infinity” fails to create jobs.

Immediate reaction to this muted statement favored USD, with the USD Basket index moving up to 0.924, but ultimately failed to even surpass the peak formed just a couple of hours before. From there on, USD weakness crept in again

USD Basket 1D

Gold/USD M10

Gold reacted positively to the news, as Fed mentioned that low rates are likely to be warranted at least through mid-2015, bringing inflation fears.

S&P500 Futures M10

Equities traded lower understandably as traders were disappointed with the silence on further action.

Bottomline:

Prices have all moved back to pre announcement levels, indicating that nothing really has changed fundamentally. Key CPI levels to watch out for will be 2.0%, as Fed expects inflation to be below 2.0%. Any higher inflation could seriously jeopardize further easing actions.

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