When Doves Cry
So that’s the end of Quantitative Easing in the US. In a carefully worded statement released yesterday, the Fed announced that QE3 was ending this month as scheduled and despite recent comments from various commentators, as expected. Maybe the comments about extending QE3 were merely strategically placed to temper market volatility.
The interesting part of the statement was how hawkish the outlook was. Nods were given towards the improving labour market, stating interest rates would remain on hold for the foreseeable future, simultaneously dismissing market volatility, the failing Eurozone economy and a weak inflation outlook. The one dissenting voice in all this was Minneapolis Fed President Kocherlakota who argued for a bolder commitment to meet its 2% inflation target.
The release of the statement saw a strengthening of the US Dollar as it regained all the ground it had lost against GBP and Euro in recent days.
Elsewhere, the Reserve Bank Of New Zealand maintained its interest rate level at 3.5% and commented on positive growth and a reduction in unemployment. There is expected to be further significant depreciation in the New Zealand Dollar.
With QE out of the way, the markets will now start focussing on other data. This morning’s main market driver is likely to be unemployment data from Germany and this afternoon we have GDP and jobless claims from the US as well as a speech by Janet Yellen and CPI from Germany.