A rather subdued session as traders try to assimilate the FOMC announcement. On the data front, New Zealand’s 2Q GDP posted an increase of +0.2%, which was higher than estimates of +0.1%, Japan's Trade Balance came out at -0.79 Trillion YEN, which was higher than the -0.81 Trillion that the market was expecting.
The FED decided to do nothing, surprising many market pundits, as apparently concerns that the economy may still be too weak to handle even the slightest reduction in stimulus overrode the worry of negative side effects of such measures. In doing so, they have kicked the proverbial can down the road. Asset purchases need to be tapered as soon as possible and without heed to labor market conditions because there is a limit to how much can be bought, how much the balance sheet can be expanded without severely disrupting the financial system.
Yesterday's decision has to viewed as a gamble by Bernanke as he prepares to exit the stage and could possibly be the move that defines his tenure. There are many in academia who argue that purchasing US Treasury bonds is not actually helping the economy any more and that it is merely a crutch that has to be discarded at some point. Maybe the reason for his "move" lies in the event that transpired over the past weekend.
Summers withdrawing his name from being considered for the FED's top post has left Yellen as the clear front runner. She is considered to be a bit more dovish than Bernanke and decidedly more so than Summers which is why the US Dollar sold off on the news. Maybe Bernanke wants to leave the decision as to when and how much to taper to Janet Yellen, the next FED Chairman.