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Forex: FOMC Continues Tapering; RBNZ Stays on Hold

Posted by Akhilesh Ganti on Jan 29, 2014 10:15:00 PM

As was widely anticipated the FOMC continued the tapering process by $10 Billion ($5 Billion each in Mortgage Backed Securities and Treasuries) and continued to reassure markets that economic growth was indeed picking up. What they did not do was offer further clarity on forward guidance of monetary policy. This is noteworthy only for the fact that the unofficial +6.5% unemployment rate threshold is a mere 0.2% points away and, if this reached in the near future, then the market will be looking for some concrete answers. It would appear that Bernanke's last official act was to leave that decision to Chairperson Yellen.

RBNZ kept their OCR on hold at +2.5% but did reiterate that the pressure to "return interest rates to more normal levels" was intensifying in order to keep "future average inflation near the 2% target". With this they seem to be sending a clear message that, barring any unexpected geopolitical events, they plan to increase the OCR at the March meeting. The Kiwi sold off on this announcement, breaching support at 0.8200, as those that were expecting a hike quickly unwound their positions.

On the economic data front, New Zealand's Building Consents came out at +7.6% which was lower than the revised +12.5% of the prior month but was higher than the -5.0% that the market was expecting. Japan's Retail Sales came out at an annualized rate of +2.6% which was lower than both last month's +4.1% and estimates of +3.8%. Australia's Import Prices fell by -0.6%, surprising a market that was expecting a rise of +1.5%.

Ranges:{WWM's New ALPHA Trader-DAILY charts [EUR,GBP,AUD,YEN,GOLD,OIL,WallStreet]}(click to enlarge)


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