FED Less Dovish than Expected, US Dollar Overall Jumps - 31.10.2013

The Federal Reserve maintained monetary policy unchanged, key rate continues at 0-0.25% and asset purchases at $85 billion per month. Also the Fed used the same language like in previous statements stating that target rate would remain at record low for as long as unemployment rate remains above 6.5%, currently is at 7.2%, and inflation expectation for the next 2 years are not above 2.5%. The US dollar index jumped from support at 79.43 to as high as 79.87 overnight as traders were looking for a more dovish FOMC. US stock indices after the FOMC statement release get heavier with Dow Jones Industrial Average closing lower by 0.39% and S&P 500 down by 0.49%.

US Dollar Index

The Euro against the US dollar dipped below support at 1.3733 and dropped as low as 1.3688, establishing a negative structure in the intraday, suggesting that could go lower. Despite that yesterday Italy’s bond auction was improved and EZ confidence indicators overall strengthened. The GBPUSD also got softer on less dovish than expected Fed inching below key downside hurdle of 1.60 and moving one step closer to create a double top trading pattern with neckline at 1.5913.

GBPUSD

The US dollar against the Japanese Yen though initially climbed from 98.04 to 98.67 then retreated to 98.26 as a less dovish Fed increased demand on safer Japanese Yen currency. The Bank of Japan earlier on Thursday held its monetary policy unchanged with money market operations targeting monetary base increase by 60-70 trillion yen per year. In its outlook for economic activity and prices BoJ upgraded slightly CPI forecasts for 2013 and 2014 although said that will continue with aggressive QE for as long as it is necessary.

Looking ahead, we are focusing on EZ Unemployment rate and CPI while later on we expect Canadian GDP data, US Jobless Claims and Chicago PMI. Concerning earnings releases Alpha Natural Resources(ANR), American International Group(AIG), ConocoPhillips(COP), Exxon Mobil(XOM and MasterCard(MA) are on today’s watch list.