Currency Note US Dollar

US continues to taper

By Smart Currency January 30th, 2014

The US dollar had a tentative day yesterday ahead of last night’s decision by the Federal Open Market Committee (FOMC). With no last minute data to give any final support or resistance, US dollar markets remained within a fairly narrow range. At the meeting, the FOMC voted to reduce its extraordinary funding of the economy by a further US$10 billion which brings it down to US$65 billion per month. The effect on the US dollar itself has been minimal as this reduction was in line with expectations. There is a fair amount of data today for investors to mull over in addition to last night’s FOMC announcement, starting with an advance growth figure and unemployment claims. Following this are pending home sales, with the three of sets of data representing important indicators as to the state of the economy.

It seems fairly clear that the quantitative easing programme will be no more by the end of this year, which means that the focus will change to the interest rate policy. Although the Federal Reserve has made it quite clear that interest rates will be kept low for a long time, each piece of economic data especially employment rates will be closely analysed as the market try’s to second guess when they will be increased.

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