The main event was the rhetoric change and updated forecasts below.
- FOMC removes ‘considerable time’ from guidance, replaced with ‘patience’
- FOMC says ‘patience’ is consistent with ‘considerable time.
Updated forecasts from the FOMC 17 December 2014
- GDP raised for 2014 2.3% – 2.5% vs 1.8% – 2.3%
- 2015 GDP range unchanged 2.1% – 3.2%
- 2016 unch 2.1% – 3.0%
- 2017 raised slightly 2.0% – 2.7% (2.6% prior)
- 2014 upper range lowered to 5.85% from 6.1%
- 2015 5.0% – 5.5% vs 5.2% – 5.7% prior
- 2016 upper range lowered to 5.4% vs 5.6% prior
- 2017 upper range lowered to 5.7% vs 5.8%
We saw the market yesterday respond the the FOMC minutes intially selling the $ but afterwards the trend developed and we saw strong $ buying. We have however since seen much of the moves retrace.
Of note has been the double bottom forming on GBPUSD at 1.5540 with the market swiftly moving back up over 100 pips. EURUSD traded as low as 1.2277 but failed to break yearly lows of 1.2245. USDJPY dipped to 117 but then ralied 200 pips to test the 119 before consolidating back down to the 118.50 handle.
In equities and commodities this more hawkish stance and up beat feel to the US economy despite short term deflationary effects of Oil sent the S&P up to new daily highs and it has continued to test the 2014 level with Oil also having a relief rally to test the 59.29 from the 54 handle.
The bond market has responded by pushing up yields indicating the market expects a rate hike sooner then the minutes suggest.
All in all this is seen as $ positive but with year end approaching and the $ already having a strong year we expect profit taking now as the year unwinds.