USD rallies on the back of the Fed

The main theme in the FX space was greenback strength on the back of the FOMC statement. 

Source: Bloomberg

QE came to an end as many expected and the Fed offered up a moderately hawkish statement. The Fed did not make reference to global growth concerns as the market was broadly expecting, sounding more optimistic about the labour market and showing less concern about moderating inflation. However, the ‘considerable time’ reference was maintained, but analysts feel this will go in December when the Fed also releases updated projections. As far as the rate hike is concerned, the market is now firmly in the Q2 2015 camp. 

USD/JPY extends gains in Asia

With this in mind, yield firmed up and US dollar strength resumed after a period of consolidation. USD/JPY is the pair I’ve been watching closely this week and it has finally started to make a move with only a couple of days’ trading left in the week.

Yesterday I looked at positions on a break above ¥108.35, last week’s highs. This would have been triggered and the pair has since traded through ¥109.00 in Asia. There is still the BoJ meeting to go and that also has potential to move the pair significantly. Further yen weakness could see the pair retest early October highs above ¥110.00. 

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.