24, September 2013

EUR/USD (a 4-hour chart)

EUR/USD (a 4-hour chart)

FOMC meeting was one of the highlights of last week, the Fed disappointed the markets, keeping the pace of asset purchases unchanged at $ 85 billion. The dollar fell sharply on the news, and the dollar index fell to 80.06, slightly higher above the psychological level of 80.

To the surprise of most of the market, the Fed refrained from narrowing of QE in September. While the labor market has shown signs of improvement, politicians believe that the outlook is uncertain, and they were concerned that the premature tightening would slow down economic recovery.

However, it should be noted that the sale of shares on Friday again reminded investors that the Fed simply delays decision about narrowing, but does not reject it. The President of the Federal Reserve Bank of St. Louis Mr Bullard said Friday that the committee could make a small contraction in October. However, the markets think narrowing in October is unlikely. More than half of economists surveyed by Bloomberg, expect a narrowing in December.

The wait can vary significantly due to the incoming data on employment. And the Fed may need to see more than 200 k NFP growth in September and October, before accepting the amount of constriction in December. In addition, it should be remembered that Yellen is the leader in the competition to replace Bernanke as Fed chairman in January after Summers withdrew his candidacy at the present time. And, Yellen is considered by many as a more dovish politician. So, the dollar is extremely unstable on NFP in the coming months.