Hindsight is a wonderful thing; well that is what the Chairman of the Federal Reserve Ben Bernanke has probably come to the conclusion of in recent weeks. The June FOMC 2013 meeting is probably not going looked back on to well in the short term with the Fed’s decision to announce their roadmap for tapering and a conclusion to QE coming to an end in June of 2014 with all things being equal. With the Fed’s decision not to taper at all overnight sent the US dollar obviously into a acute selling phase since 4.30am this morning, notably the Australian dollar breached the 95 US cent mark before easing back in the last hour to 94.95 US cents, still a 2 cent gain on this time yesterday. All US dollar pairs had similar movements with some highlights being the Pounds which jumped up above 1.61 USD putting it it a few pips away from a 2013 high and Gold picking up of 60 USD an ounce.
Outside of the FOMC meeting currency trading was very quiet in the lead up with most pairs going sideways through the European session the noteworthy exception was the Pound which firmed after the Monetary policy committee again affirmed 0 votes for further QE there which helped it firm from 1.59 USD to 1.5977 USD. It held those gains before the FOMC meeting after which it took off again.
Wall Street’s bumper 1% returns overnight and the battering that the US dollar took is likely to see pretty solid confidence in our local market today and analysts scrambling to reassess both the likelihood of any Fed movement this year and near term risk asset trade levels. Where the Australian dollar is headed to will be in question but our own unemployment concerns are likely to temper any parity discussion with the Greenback. New Zealand Quarterly GDP has just been released on target at 0.2%, and there was quite a reaction from the Kiwi which has picked up 60 pips versus the AUD and USD.
Joel Murphy
www.pepperstone.com Joel Murphy is a currency analyst and market commentator for Forex Broker Pepperstone and he regularly features on Sky Business News Australia. He has worked in both retail and institutional Forex for last 8 years and completed a Bachelor of Commerce and a Bachelor of Arts from Monash University
