FOMC mix it up

Yesterday the Federal Reserve held
their monthly meeting and although little was said the implications
were telling.  The FOMC suggested that US growth could lead to
a taper in December or January, swinging the momentum from dovish
to hawkish.  Markets were not expecting to see a taper until
at least March and potentially beyond with the introduction of new
Fed chair Yellen who is pro-stimulus.  The Fed are certainly
trying to keep the markets guessing in regards to the timing of a
taper, and this will certainly add further weight to US data
releases and next week’s non-farm payroll data.  The USD has
gained in the markets – most prominently against the euro. This
appears to be mind games from the Fed to avoid an over-reliance and
dependence on liquidity as we still will not see a taper until mid
to late 2014.

We have also seen central bank
meetings from New Zealand and Japan with no surprises that policy
measures were left unchanged for both.  The BOJ noted that
growth will exceed potential and inflation is on course to move
towards the 2 per cent target.  The RBNZ noted that interest
rates may need to go up in 2014 in New Zealand although the
strength of the NZD could delay a rate rise. 

In other news the euro is under
pressure following comments from ECB member Nowotny who suggested
that more liquidity will be required as the LTRO’s reach their
conclusion.  The swing of the FOMC from dovish to hawkish will
also raise the expectation that the ECB will need to do more with
next week’s ECB meeting which is now more prominent.
 Elsewhere UK Nationwide house price data surged upwards by
1.0 per cent month on month for October highlighting further heat
in the housing market.