Extended Tapering Guidance Well Into 2014 with The First Federal Reserve Cuts Expected in March

Safe haven currency The USD rallied across the board overnight as the Federal Open Market Committee's (FOMC) monthly rate statement failed to meet the markets dovish expectations. Ben Bernanke and the Fed made it clear that the current buying of government and treasury bonds will continue unchallenged until unemployment and inflation targets are met. While this was largely expected markets were surprised by claims from the Fed chairman that recent fiscal policies were restraining the economy and that the committee "sees the improvement in economic activity and labour market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy". The comments reduced the overall dovish tone of the statement and prompted investors to rally behind the Greenback.

Looking forward analysts have now extended tapering guidance well into 2014 with the first Federal Reserve cuts expected in March, couple this with the threat of further government indecision in February as the debt ceiling debate rears its ugly head again and we expect the general USD trend to remain relatively Bearish and more bearish  

Meanwhile, Asia's safe haven currency Japanese Yen was placed under some pressure this morning as the Nikkei reported that the government will need to trim some 3 trillion YEN from the budget in the next fiscal year if debt targets are to be met, while Spain officially recorded its first quarter of growth in over 2 years lifting the country out of recession.

The recovery remains fragile but the 0.1% increase in GDP is a huge boost for the Spanish economy which was decimated after its housing market collapsed in 2008 and its banks were left with billions of Euros of bad loans. The USD opens stronger this morning against both the EURO and the YEN at 1.3737 and 98.53 respectively. 

Data Releases:

AUD: Building Approvals, Import Prices and Private Sector Credit          

NZD: Official Cash Rate, RBNZ Rate Statement, Building Consents and ANZ Business Confidence

JPY: Average Cash Earnings, Monetary Policy Statement, Housing Starts, BoJ Outlook Report and Press Conference.

GBP: Nationwide HPI and GFK Consumer Confidence.

EUR: German Retail Sales, GFK German Consumer Climate, German Import Prices, French Consumer Spending, Italian Monthly Unemployment, Eurozone Unemployment, CPI Estimates and Italian Prelim CPI.

USD: Unemployment Claims

Source: ozforex