Market Review - 30/07/2014 22:55GMT
Dollar rallies broadly after U.S. GDP tops market forecast, FOMC offers no surprise
The greenback rallied to a fresh 4-month high at 103.08 against the Japanese yen after U.S. Q2 GDP jumped to 4% and price extended intra-day gain after Federal Reserve Chair Janet Yellen and fellow policy makers indicated in the FOMC statement that the slack in the labor market persists even as the economy is picking up, and they continued to trim monthly asset purchases.
The Fed kept interest rate unchanged at 0-0.25% and reduced bond buying to $25 billion per month, split as $10 billion mortgage-backed securities (MBS) and $15 billion treasuries.
The Federal Open Market Committee said in a statement in Washington that "a range of labor-market indicators suggests that there remains significant underutilization of labor resources; the likelihood of inflation running persistently below 2 percent has diminished somewhat."
Philadelphia Fed President Charles Plosser dissented, objecting that the guidance on the timing of a rate increase was "time dependent" and didn't reflect "considerable economic progress."
The yield spread between Treasury two-year notes and similar maturity German bunds reached the most in more than seven years.
The single currency tumbled to a fresh 8-month low at 1.3367 after the release of stronger-than-expected U.S. GDP data. The preliminary 2nd quarter GDP jumped to 4.0%, well above market consensus of 3.0% whilst Q1 growth was revised upward to -2.1% vs previous reading of -2.9%. However, profit-taking lifted price to 1.3405 in late New York after FOMC rate decision.
The British pound also weakened versus the U.S. currency to 1.6890 on dollar's broad-based weakness before rebounding strongly to 1.6928 on short-covering after FOMC rate decision.
Thursday will see the release of U.K. GfK consumer confidence, Australia's building approvals and private home approval, Japan's housing start and construction orders, Germany's unemployment rate, Canada's GDP and U.S. Challenger layoffs and Chicago PMI.
Dollar rallies broadly after U.S. GDP tops market forecast, FOMC offers no surprise
The greenback rallied to a fresh 4-month high at 103.08 against the Japanese yen after U.S. Q2 GDP jumped to 4% and price extended intra-day gain after Federal Reserve Chair Janet Yellen and fellow policy makers indicated in the FOMC statement that the slack in the labor market persists even as the economy is picking up, and they continued to trim monthly asset purchases.
The Fed kept interest rate unchanged at 0-0.25% and reduced bond buying to $25 billion per month, split as $10 billion mortgage-backed securities (MBS) and $15 billion treasuries.
The Federal Open Market Committee said in a statement in Washington that "a range of labor-market indicators suggests that there remains significant underutilization of labor resources; the likelihood of inflation running persistently below 2 percent has diminished somewhat."
Philadelphia Fed President Charles Plosser dissented, objecting that the guidance on the timing of a rate increase was "time dependent" and didn't reflect "considerable economic progress."
The yield spread between Treasury two-year notes and similar maturity German bunds reached the most in more than seven years.
The single currency tumbled to a fresh 8-month low at 1.3367 after the release of stronger-than-expected U.S. GDP data. The preliminary 2nd quarter GDP jumped to 4.0%, well above market consensus of 3.0% whilst Q1 growth was revised upward to -2.1% vs previous reading of -2.9%. However, profit-taking lifted price to 1.3405 in late New York after FOMC rate decision.
The British pound also weakened versus the U.S. currency to 1.6890 on dollar's broad-based weakness before rebounding strongly to 1.6928 on short-covering after FOMC rate decision.
Thursday will see the release of U.K. GfK consumer confidence, Australia's building approvals and private home approval, Japan's housing start and construction orders, Germany's unemployment rate, Canada's GDP and U.S. Challenger layoffs and Chicago PMI.
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