Come on, did we really think a taper was coming? Really? Federal Chairman Ben Bernanke has said for three consecutive FOMC minutes that there will be accommodative monetary policy until unemployment decreases to seven percent and the labor market improves from where it currently is. Unemployment is 7.3 percent and the labor market is solid one month and weak the next. I believe the analyst estimates of a taper were merely trying to jump the gun, or the Fed. Unfortunately, the Fed has all the ammo.
The FOMC minutes statement reported “the committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases…. the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement.”
Sometimes I can be a bit satirical when dealing with the Fed, but this is basically piecemeal from each of the last couple FOMC statements.
“Asset purchases are not on a preset course, and the committee’s decisions about their pace will remain contingent on the committee’s economic outlook as well as its assessment of the likely efficacy and costs of such purchases.”
The dollar was slaughtered down almost a full percent after the announcement after already being on weak ground. All major pairs shot up to what seemed to be the stars; the eurodollar hits 1.347, aussie hits .947 and the Pound up over 140 pips, combining this morning’s UK data release, hitting 1.6065.
The dollar pulled back, but is resting cautiously at 4H support. A break and close below will signal further moves down to 80.25-33.