By Ashraf Laidi
The only meaningful change in yesterday's FOMC statement is more willingness to carry out contingency plans by stating: "will closely monitor incoming info" "will provide additional accommodation as needed", from June's statement: "prepared to take further action as appropriate".
The Bernanke Fed hands the stimulus torch back to Draghi, on whom the onus of further market up-lift shall fall.
US DOLLAR RALLIES ACROSS Dollar rallies across the board, hitting metals and risk currencies as the Fed further softens its economic outlook without extending the period of "exceptionally low rates" from its existing 2014 to 2015.
INTERESTINGLY, GBPUSD is down on the day twice as much than EURUSD (-0.63% vs -0.35%) as the euro may be relying some sort of action from the ECB in tomorrow's meeting, such as signalling a restart of SMPs and potentially paving the road for a 4 or5 year LTRO in September.
Fed is well aware of the DIVERGENCE between the broadening macro deterioration in the US/world, and the notable improvement in market metrics (EUR-OIS spread is at 12-month lows, G10 equities are only 3-5% below their 2012 highs, VIX at 5 points above its 5-year lows and
Spanish and Italian 10-year govt. yields are 10-15% off their highs).
Recall, that the euro is up mainly on last week's statements from the ECB and not from improving data. Such stabilization in overall risk appetite has clearly reduced the urgency of implementing the Fed's additional measures. This has been the modus operandi of the Fed these days.
Ashraf Laidi is Chief Global Strategist at Leading Spread Betting Company - City Index
Comments