EUR/USD reacts to further Fed tapering

The Federal Open Market Committee confirmed that they would be reducing the monthly debt purchasing scheme by a further $10 billion.

As today is 1 May Italy, France and Germany are all on a bank holiday, so we might see a little more volatility as trade volumes may be lower.

Yesterday saw US advanced quarterly gross domestic product figures come in considerably weaker than the markets had expected. The 0.1% growth, rather than the expected 1.2% growth, saw EUR/USD add over 100 pips as the day progressed. The blame for these disappointing figures was quickly attributed to the bad weather that the US had suffered in the early part of the year, but the lingering fear that the US recovery had stuttered slightly was voiced.

Last night saw the FOMC reduce its monthly asset purchasing by $10 billion down to $45 billion. They also stated that this reduction would continue in measured steps, inferring that they would maintain the current pace. If that were to be the case, this could be completed by the end of the year.

The last two and a half months has seen the EUR/USD rate swing between $1.3700 and $1.3900, and has looked in need of a good catalyst to force it out of that range. The $1.3900 region has seen sellers encouraged back before these recent developments, which might be enough to see this current ceiling finally broken, and an ultimate retest of the October 2011 highs of $1.4100.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.